Think Availing the Tax Amnesty
No place to hide!
In view of a largely undocumented economy, the government has introduced a tax amnesty to enable all citizens of Pakistan, except public office holders and their dependents, to declare their undeclared assets and incomes. Under this amnesty, taxable persons may declare benami assets, foreign liquid assets, bank accounts, undisclosed sales and all types of other moveable and immoveable assets by paying nominal tax as the purpose of the tax amnesty is to enhance the size of formal economy. Unlike the tax amnesty 2018, this scheme covers benami assets, benami bank accounts, undisclosed sales and expenditure, bank credit entries and tax demands under litigation in courts of law, i.e. the appellate tribunals, the High Courts and the Supreme Court of Pakistan.
Primarily, the tax amnesty has been introduced to allow undocumented economy’s inclusion in the taxation system and to serve the purpose of economic revival and growth by encouraging a tax-compliant economy. However, the Federal Board of Revenue (FBR) is eyeing to generate sizeable revenue through this scheme in order to mitigate immense pressure on revenue side as it has been facing mammoth shortfall in revenue generation vis-à-vis assigned revenue target.
Why should taxable persons holding undeclared foreign assets avail themselves of tax amnesty? It is because Pakistan is signatory to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the OECD Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information. Under these agreements, Pakistan has been collecting from and providing financial account information to foreign tax jurisdictions. As the mechanism of automatic exchange of information exposes hidden offshore assets, investments, income and accounts of resident Pakistanis to the tax authorities, i.e. the FBR, taxable persons failing to avail tax amnesty will face potential civil, tax and criminal penalties for not reporting.
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