Foreign investors oppose tax amnesty scheme for offshore assets
KARACHI: Foreign investors expressed concern over a proposed tax amnesty scheme to bring back offshore investments, terming it as an injustice with compliant taxpayers, officials said on Monday.
Overseas Investors’ Chamber of Commerce and Industry (OICCI), representing major foreign companies in Pakistan recently shared its concerns, through a letter, with Special Assistant to Prime Minister on Revenue Haroon Akhtar, sources in the Federal Board of Revenue (FBR) said.
FBR sources who have seen the letter said OICCI’s members are perturbed over the proposed amnesty scheme to legitimise unofficially acquired offshore assets of Pakistani citizens at a nominal single digit tax rate. “Nearly all the amnesty schemes launched in the past 10 years have failed to yield the desired outcomes,” an official cited the letter as saying.
The proposed amnesty scheme will be the fourth to be launched by the present government. Under the scheme, Pakistan’s expatriates or locals who have assets in foreign country would be able to declare their holdings against two percent tax payment if they agree to bring them back or four percent in case they opt for keeping them abroad.
Last week, Rana Muhammad Afzal, minister of state for finance and revenue said the proposed tax amnesty scheme would be rolling out on March 15 to encourage repatriation of billions of dollars of funds stashed abroad.
Afzal, addressing an event, said the government wanted to increase foreign exchange reserves and to meet debt obligations. “The government is focusing to increase foreign exchange reserves as an amount of $3 billion is scheduled to pay (till June-end) to IMF (International Monetary Fund),” he added.
Foreign investors said they are tax compliant and have been the largest taxpayers in the country, fulfilling all legitimate tax liabilities of their business activities. “Such proposed amnesty scheme will not bode well for the compliant taxpayers,” the officials quoted the letter as saying.
“Tax amnesty schemes send extremely wrong signals to compliant taxpayers in the corporate, trade and service and salary sectors.”
OICCI comprises representatives of 192 foreign investors who account for 30 percent of the total collected taxes, roughly one-sixth of GDP, invest $1.5 billion per annum and provide jobs to around one million people in Pakistan.
Foreign investors said instead of rewarding those who have evaded the tax for the past many years there is a need to incentivise the legitimate taxpayers, like OICCI members, by eliminating ad hoc tax levies such as the 3 to 4 percent super tax reducing the corporate income tax rate to 25 percent or below and sales tax on goods to 13 percent, in line with the regional average, and broadening the tax base, using the substantial database already available with the tax authorities.
The government planned to rationalise tax rates in the budget for the next fiscal year of 2018/19. It is likely to increase minimum threshold for income tax to Rs800,000 from existing Rs400,000 and may reduce corporate income tax rate to 20 percent from 30 in a phased manner.