As per a Bloomberg article, Pakistan is considering tax amnesty in order to encourage Pakistanis to declare wealth held in the form of foreign assets. The move is being considered in order to boost stocks, bonds and property.
Syed Masoud Ali Naqvi, a member of the government’s Tax Reformers Implementation and Monitoring Committee informed that no decision has yet been reached regarding the proposal. According to Naqvi, the government is targeting the country’s businesses who possess undeclared wealth in the form of offshore holdings.
According to Hasnain Malik, a Dubai-based analyst with Exotix Partners LLP, if the proposal is implemented, it would prove useful in generating revenue for the government in addition to offsetting the risk of fiscal slippage ahead of the general elections 2018.
Moreover, Shiraz Zaidi, the research head at Karachi-based brokerage Arif Habib Ltd is reported to have said that the tax amnesty may add liquidity to the stock market and real estate sectors of the country. He added that several countries had implemented tax amnesty on similar lines which points to the fact that the proposal is likely to be implemented.
According to Exotix, there is potential for Pakistan to generate $3.5b in tax revenue (1pc of nominal gross domestic product) provided 30pc of undeclared offshore assets are declared through a levy of 8.5pc tax.
According to estimates, Pakistanis hold about $150b in undeclared foreign assets. Out of the total, $80b are held in property and bank deposits, $20b in local stocks held in foreign accounts and $50b in assets such as manufacturing concerns, the estimates revealed further.
As per the Bloomberg article, 1pc of 200m Pakistanis pay taxes, and previous amnesty programs had limited impact on the widening of tax base. Moreover, the country suffers from one of the lowest tax-to-GDP ratios in South Asia despite tax reforms being introduced as per the IMF’s recommendations.
The article states that a mere 0.3pc of traders participated in the tax amnesty programme last April as opposed to governments expectations of 17pc. The amnesty only helped muster Rs750m after 4 deadline extensions.
