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“We are introducing a tax amnesty scheme through which people with undeclared income earned before June 30, 2017, on assets within the country will be able to bring them in the tax net by simply paying a five percent penalty,” the prime minister said.
He added that people who hold undocumented assets outside the country will also be able to declare them through the new amnesty scheme by paying a 2% penalty. Fixed assets will incur a 3% penalty, to be evaluated at the market value of the asset, which cannot be less than the cost of its acquisition. F
foreign liquid assets like cash, securities and bonds held abroad and in local dollar accounts may be declared with a 5% penalty. Dollar account holders in Pakistan who have purchased dollars with undeclared funds can also regularise them on 2% payment.
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Furthermore, any new foreign exchange accounts can only be opened by tax filers. “People who take part in the amnesty scheme will be given a one-time exemption from accountability and other laws,” the prime minister explained.
However, he stressed that politically exposed persons and their families will not be able to avail the amnesty scheme. The prime minister noted that only 1.2 million Pakistanis file income tax returns. He further noted that of these, only 700,000 actually paid tax, while others filed returns but paid no income tax.
Presenting his package as an incentive for more people to enter the tax net, Abbasi stressed he felt this to be the most optimum way to maximise the government’s revenues keeping in mind the significant challenges it faces.
He said those with annual income up to Rs 1.2 million will be exempted from tax while 5 % tax will apply on annual income from Rs 1.2 to 2.4 million. Ten percent will apply on income from Rs 2.4-4.8 million and 15% on over Rs 4.8 million.
The government previously used 12 tax brackets for salaried individuals and eight for self-employed individuals to calculate their income tax liabilities. Abbasi also revealed that national identity cards numbers of all citizens will now become their tax numbers and people will now be able to use these numbers to file taxes by simply filling out a form.
“Last year, only 0.7 million people paid taxes and most of those did not have an option since they were salaried employees. This is an unsustainable situation,” he said. He also hinted at major reforms to tax property holders.
“On any property that a citizen purchases, they will have to pay a one percent ‘presumptive tax’. That tax will be adjusted in their annual taxes,” he said. “No purchase of property over Rs 4 million is possible for non-filers of tax returns from July 1, 2018,” he added.
“To avoid under-invoicing (in property sale and purchase deeds), the government now holds the right to buy any property that a citizen holds by paying 100% over its declared price,” the prime minister warned.