Prime Minister of Pakistan, Mr. Shahid Khaqan Abbasi, today announced a five point reform for changes individual tax rates, Foreign Assets Declaration and Repatriation Ordinance and Voluntary Declaration of Domestic Assets Ordinance.
Special Advisor to Economic Affairs, Mr. Miftah Ismail was also present with the Prime Minister. A large horde of journalists, reporters, columnists and writers were attending the press conference.
The following changes were made in the individual tax rates:
- Individuals with 12 lac per annum exempted from tax
- Individuals with income falling between 12-24 lacs per annum will be taxed at 5 percent
- Individuals whose income per annum falls between 24-48 lacs will be taxed at 10 percent
- Individuals with income 48 Lac per annum will be taxed at 15 percent
The above mentioned slab will be implemented at the start of coming fiscal year.
Under the newly devised Foreign Assets Declaration and Repatriation Ordinance foreign exchange repatriation will be allowed at a fee of 2 percent. Furthermore, foreign exchange repatriation could be done from one of the two provided options; bonds for five years at the rate of 3 percent per annum (6 month payment) or all encashment in Pak Rupee @ prevailing interbank dollar rate. The ordinance also holds a 2 percent payment clause for those individuals who have purchased dollars through undeclared money.
In addition to the above clause(s), declaration of foreign fixed assets has been allowed at 5 percent with the condition that the asset is declared at market price but not in any case should it be declared below the cost of acquisition. 5 percent fee has also been set for those individuals declaring foreign liquid bonds, cash, securities etc previously held abroad.
In addition to the Foreign Assets Declaration ordinance, a new ordinance with Voluntary Declaration of Domestic Assets Ordinance (VDDAO) was also announced under which the NIC of declaring individuals would be used as their Tax numbers. Furthermore, volunteers will also benefit from reduced tax incidence:
- Maximum 1 percent tax (local and provincial) for registration of property being recommended
- At Federal level Adjustable Advance Income Tax being reduced to 1 percent
Furthermore, the Federal Government under the VDDA Ordinance will have the power to buy individual properties anywhere in Pakistan within six months of registration for:
- 100 percent more for properties registered in FY 2018-19 (50%)
- 75 percent more for properties registered in FY 2019-20 (57%)
- 50 percent more for properties registered in FY 2020-21 & thereafter (67%)
Prime Minister also explicitly announced that politicians along with their extended families will not be able to claim amnesty under this scheme. He also said that this amnesty is a final chance to tax evaders to declare their income and assets otherwise strict punitive actions will follow. The Prime Minister also informed that the Foreign Assets Declaration and Repatriation Ordinance is not valid for funds from Money laundering, Drug smuggling and Terror financing.
The Prime Minister said that a sophisticated system for detecting tax evaders has already been developed which will be put into effect after the amnesty scheme expires. He said that the vigilance under the new system will be extremely thorough and will monitor movements of evaders within and out of the country, their expenditure habits along with their purchase patterns.
In answer to a question from one of the attendees at the conference, he said that “this scheme will definitely increase the number of tax payers in the tax net and increase government revenue from Tax collection.”
Regarding the modus operandi of the implementation of this Scheme, Prime Minister said that the Amnesty Scheme 2018 will be brought into effect with the approval from Executive branch of Government. President Mamnoon Hussain will sign the ordinance, therefore, declaring the decree legal.
He said that the announcement of scheme was delayed due to extensive discussions on the scheme and to identify loopholes and block them. The Prime Minister said that the “said scheme has approval from all the institutions of the country be it Judiciary, Executive or the Military factions.”
The Prime Minister had recently met Honorable Chief Justice Mian Saqib Nisar, amongst extensive speculation on what transpired in the meeting.