The Prime Minister’s package for the construction industry was a good initiative based on reviving business and introducing more people into the tax bracket. Yet the amnesty scheme seems to be encountering many logistical problems owing perhaps to a reluctance of stakeholders to get registered. The builders and developers were at first required to get registered on computer-based IRIS software of the Federal Board of Revenue (FBR) on or before December 31. Yet owing to lack of registrations, the government extended that date to June 30 of this year.
However, again it looks like the extension did not come through since it seems like the government is in the works for another extension. Finance Minister Shaukat Tarin has said the government has sought from the International Monetary Fund a six-month extension of the amnesty scheme.
This is not surprising—there is a trend of granting extensions to amnesty schemes. The issue now is whether the IMF programme will continue considering that it has been made subject to so many changes.
The problem seems to be that extensions have become an overused tool—with little evidence in this case that they will serve as incentive rather than a deterrent. Extensions can go both ways; if no strict deadline is enforced, it gives leeway to builders and developers to stay unregistered as long as possible knowing a blank cheque scheme may be in the works.
Extensions need to be made on a case-by-case basis, evaluating the potential results—they need to be made regarding the efficiency of such a move. If the aim is to increase revenue streams through strategies like incorporating more people into the tax net, how will the government do this considering that it is offering relief to many segments of the society—including the poor, salaried class and new entrepreneurs? A thorough overview of this policy is required, especially if IMF approval is to be sought.
That is a lot at stake. The government needs to enact better reforms than short term solutions like amnesty schemes to bring more people into the tax bracket.