ISLAMABAD: While the ruling party has failed to get the tax amnesty scheme approved by National Assembly Standing Committee on Finance, the Senate committee on finance approved the scheme but with amendments on Tuesday.
The Senate’s Standing Committee on Finance has approved the amnesty scheme but with the amendments proposed by majority members of the committee. Two members of the committee, Senator Musaadiq Malik and Ayesha Raza who belong to the ruling party PML-N, favoured approving the bill as it is. Members belonging to Pakistan Tehreek-e-Insaf, Pakistan Peoples Party and others joined hands to introduce amendments to the bill.
Senator Farooq Hamid Naed chaired the committee meeting. He, at the beginning of the meeting, questioned that why there was urgency in introducing four ordinances to give cover to the tax amnesty scheme for whitening of local and offshore hidden assets. Responding to his query, Chairman Federal Board of Revenue (FBR) Tariq Pasha admitted that the scheme was being introduced late though the government was working on it for a long time. He said since the government has signed and ratified the Economic Cooperation and Development’s (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Under this Convention, an exchange of information mechanism is being established for tax purposes in more than 100 countries, including most of the tax havens. It will enable Pakistan to seek information on banking and other details of Pakistani residents from these countries for taxable periods from 2018 onwards and for tax matters involving intentional conduct which is liable to prosecution, for earlier taxable periods as well. The provisions of this Convention will expose Pakistanis’ hidden offshore accounts and assets to FBR and help contain cross-border tax evasion.
“We did not want to lose the time-bound opportunity. The government has the authority and legal tools to avail such opportunity. After the change in international rules it has become difficult for hiding assets abroad,” said Rana Afzal Khan, Minister of State for Finance and Economic Affairs.
“The assets of Pakistanis abroad could be confiscated in case such facility is no extended,” said chairman FBR.
Senator Mohsin Aziz, of PTI said that the scheme was being introduced to facilitate the money launders, dacoits and illegal assets holders. Senator Ayesha objected saying that those of criminal records were not eligible to benefit from the scheme.
The committee approved the 2 percent tax on foreign currency accounts holders to declare their liquid assets. For all other domestic assets, the rate will be 5%.
With much deliberation, the committee approved amendments in rule to make mandatory of providing a record of assets of 10 years with the objection of the ruling party’s members who wished set the rule as per the internationally practised procedure of four to five years.
The meeting discussed ‘The Voluntary Declaration Domestic Assets Bill 2018’, ‘The Foreign Assets (Declaration and Repatriation) Bill 2018’ and the amendments in Income Tax Ordinance 2001 and the Protection of Economic Reforms Act 1992.
The Committee witnessed a heated debate between Senator Mohsin Aziz of PTI strongly opposed the amnesty scheme and faced standoff from Senator Musadik Malik along with Senator Ayesha Raza.
However, the former chairman of the committee and deputy chairman of the upper house Senator Saleem Mandviwala helped resolve arguments, but the committee with a majority vote approved several amendments in the proposed amnesty scheme.
Whereas, Senator Saleem Mandviwala had serious reservations over amendments in Protection of Economic Reforms Act (PERA) 1992 on the grounds that this law was never part of the money bill.
However, after extensive discussions, Senator Mandviwala agreed to the point of view of Finance Ministry. The amendment in the PERA 1992 prohibits depositing cash in foreign currency accounts by a non-filer.
Incidentally, Senator Musadik Malik who is also the spokesman and special assistant to the prime minister joined voice with Senator Saleem Mandviwala and told the officials that majority of the foreign currency account holders were non-filers, non-resident Pakistanis were allowed to open foreign currency accounts- and asked the rational of the amendment in PERA1992.
“If a non-resident Pakistani buys dollars from open market – deposits the cash in his foreign currency account and withdraws it abroad, is there any law to check?” Senator Musadik Malik asked the officials of State Bank and received the answer that there was no law to check it.
Senator Saleem Mandviwala than gave his consent to the amendment in PERA 1992 saying that it was a flawed idea and the arguments were fruitless.
It was the Senate standing committee first meeting under the chairmanship of Senator Farooq Naek and it was attended by fresh members of the upper house including Senator Musadik Malik, Senator Dilawar Khan, Senator Muhammad Akram of National Party, Senator Khanzada Khan of PPP and independent Senator Aurangzeb Khan.
It may recall here that the tax amnesty scheme is already in effect after President Mamnoon Hussain promulgated four ordinances. The validity period of any ordinance is four months and the government has offered the scheme only for 80 days.
The president promulgated Foreign Assets Declaration and Repatriation Ordinance 2018, Pakistan Economic Reforms Protection Act Amendment Ordinance 2018, the Voluntary Declaration of Domestic Assets Ordinance 2018 and Income Tax Amendment Ordinance 2018.
Through the Income Tax Amendment Ordinance 2018, the government has also empowered the FBR to ask about the source of foreign remittances if the value exceeds Rs10 million in a tax year. Those who have foreign income and assets will now be required to file their foreign income and assets returns and statements. In case of offshore assets, the FBR has obtained the right to open old cases, abolishing the condition of five-year-old cases.
