Taxation: Threat after threat to overseas expats, locals
Regressive Taxation may lead to unrest
By Prof Dr Abdul Jabbar Khan
Neuro Economist / Islamabad
All Pakistan Businessmen Association has called a meeting at Islamabad on July 1 to plan a protest on what they call the most regressive and repressive budget of the country ever faced by the tax payers and traders. The members of the association will get together at Islamabad G5 and will examine the budget and tax measures introduced by the PTI government, it is learnt.
Studying minutely the taxation regime in Pakistan one simply conclusion emerges whether it is Islamic regime, regressive taxation or progressive system has been launched by the economic wizards of the Prime Minister. However one thing has emerged in past one week, PM Imran Khan threatened the people for getting ready for a crackdown. He reiterated that the deadline to avail the asset declaration scheme would not be extended and warned that the government would have no other option but to pursue the tax evaders with force if they fail to benefit from the scheme according to Radio Pakistan.
The students of economics, especially those who have close eye on taxation revenue, development proposition and borrowed funding for development or budgetary support would find that during past eight successive regimes in particular and around a dozen government in past have no progressive or motivational taxation system, it was rather coercive, tempted for corruption, ultimately leading to so-called one or the other amnesty schemes to whiten money.
Just to cite an example, though there could be many such, the prize bonds scheme has become a headache for the bureaucrats or political figures this time. Never during past fifty years Pakistanis living abroad were threatened earlier.
Pakistani nationals living in United Arab Emirates (UAE) were warned on Tuesday to disclose their ‘hidden’ assets by June 30 to avoid penalties and imprisonment.”All Pakistanis are required to declare their concealed assets under the new tax amnesty scheme called the Assets Declaration Scheme launched by the Pakistan Tehreek-e-Insaf (PTI) government on May 15.
One may observe as if the captain of a team, PM is behaving, tax paying businessmen as well as overseas Pakistanis are being threatened. Was there a need like this that the tax officer goes to Dubai, addresses the expats and threatens them to declare their assets.
Needless here is to say the biggest contribution of expats who have remitted over 21 billion US dollars this year and the government of Pakistan has again failed miserably to channelize this hard earned money by Pakistanis living abroad.
Although overseas Pakistanis are exempted from paying any taxes on their income abroad, they are required to declare their assets if they cannot prove that they were bought with legal resources.
They will also have to declare all their assets, including properties, businesses and bank accounts they have in Pakistan if they are generating income from them. The wealth that remains undeclared after the deadline would be confiscated and defaulters could also face prison time, local newspaper Gulf News has reported.
“If overseas Pakistanis can prove that the property they own in Pakistan was bought with legally remitted money or the bank account they have in any Pakistani bank has money sent through legal banking channels, they do not need to worry as they are exempted from declaring them and they do not need to pay any taxes,” Dr Mohammad Ashfaq Ahmad, Director General (International Taxes) at the Federal Board of Revenue, told the Pakistani diaspora at the Pakistan Consulate General in Dubai.
The FBR official reportedly handled harsh questions from the community members tactfully. Many of them raised the concern that they do not have proof of all their money remitted to Pakistan and hence they are unable to proof the money trail despite the fact that they have been living abroad for decades.
Dr Ashfaq said that bank accounts and properties whose ownership cannot be backed must be declared at all cost. “It would be your last chance to whiten your ‘hidden’ money and assets as there will be no more amnesty after June 30,” he added. The FBR official said the government would freeze the undeclared accounts, and also impose heavy penalties on properties whose money trail cannot be traced. Violators may also face imprisonment of up to five years.
The recent televised clip of the prime minister wherein the worthy chief executive observed as there are very few tax payers has astonished the trading and salaried class across Pakistan saying that every citizen, children or old aged are the tax payers, be they are direct or indirect tax payers. How can the government or the FBR can claim that there are around one to two million tax payers. The figures are based on tax returns formally filled up whereas the fact remains that indirect and direct taxation is the order of the day where the infants too pay the tax to the national exchequer and it is wrong to say that there are few hundred thousand tax payers.
In the new fiscal the estimated over 1.4 trillion rupees tax plan the activities in economy, trade and business, manufacturing and agriculture or service sectors are not that visible that could entail the massive target in place. The analysts are of the considered view that the federal revenue officials and the new wizards of taxation are playing shots and that too may hit the wrong side of the economy. They hinted at that the tax burden, rising unemployment and increasing urban street crimes, downturn in exports and slow economic going are the factors that needed to be examined by PTI chief and his colleagues who wanted to have the highest tax collection target.
Knowingly the businessmen have started agitating and the convention at Islamabad would be the start of a new campaign a leading businessman apprehended. The increase in income tax, general sales tax and the expansion of the net is adding pressure on the middle, lower middle and poor classes whereas the natural gas, POL products prices and transportation costs are the additional challenges that may cause a big unrest.