India and Pakistan: Tax Incentive Packages Comparison

Tax Amnesty Schemes in Pakistan and India

2.1     General Overview of Tax Amnesty Schemes introduced in Pakistan

While tax amnesties differ widely in their design and character, they share many common features. A traditional amnesty is offered to all persons – those who have never filed returns and also those who file their returns but have not accurately disclosed their income or assets. Amnesties are sometimes designed to target a group of taxpayers in a particular sector of economy where tax evasion is rampant.

Pakistan had introduced its first tax amnesty scheme in 1958 which shows that undocumented economy and tax evasion has been a lingering issue of the Pakistani economy for almost sixty years. Over the past decades multiple amnesty schemes with varying parameters and features have been introduced. As discussed above, the first one was introduced in 1958 followed by the schemes of 1997, 2000, 2001, 2008, 2012, 2016, 2018, and 2019.

The stated short-term reasons for tax amnesty schemes in Pakistan are usually a one-time relief, bringing the non-compliant taxpayers in the tax net and injecting investment for economic growth. The long-term reasons for providing facility of such amnesty schemes include documentation by increasing the tax base and improving tax to GDP ratio.

The major schemes introduced in the recent past are of 2016, 2018 and 2019 which requires to be examined in detail in order to make an analysis. The proceeding sub-section of the study discusses the salient features of schemes

2.2     Salient Features of major tax amnesty schemes introduced in Pakistan in the last decade.

Government had introduced Tax Amnesty Scheme 2016 named as Voluntary Tax Compliance Scheme (VTCS) through the Income Tax Amendment Act, 2016 in the light of negotiations with different trade bodies in the wake of withholding tax under section 236P of the Income Tax Ordinance,2001 on banking transactions. VTCS not only provided an opportunity to traders who were non existing taxpayers but the benefits of this scheme was also extended to traders who are existing taxpayers.

The Federal Government held discussions with the traders to facilitate their smooth entry into the tax-net and to redress the grievance and apprehensions of traders that had continued since the introduction of the tax in July 2015.

As a result of these discussions, finally a scheme was designed with consensus of the representatives of the traders community that would meet the needs of traders while simultaneously protecting the integrity of the tax regime. The scheme is based on introducing a new Schedule of simplified assessment under the Income Tax Ordinance 2001, which would fully take into account the complexities and peculiarities associated with the business of traders.

The present Government introduced the Asset Declaration Ordinance, 2019 dated 15th May, 2019 for the purpose of allowing inclusion of the non- documented portion of the economy in the taxation system and incentivizing economic revival and growth by encouraging a tax compliant economy.

Tax amnesty scheme 2019 i.e Asset Declaration Scheme 2019 is comparable in terms of its characteristics with the tax amnesty scheme of 2018, therefore the merits of the recent scheme shall be compared with that last years’ scheme as follows:-

S.No. 2019 2018
1. Eligible persons to avail the scheme

 

i.          The Asset Declaration Scheme, 2019 allowed any person to avail the scheme except for:

a)      Persons who are or have been holder of public office during the last ten years, their spouses and dependents;

b)      Public company as defined in clause (47) of section 2 of the Income Tax Ordinance, 2001;

Eligible persons to avail the scheme

 

i.          Under the amnesty schemes of 2018 companies could also avail amnesty.

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