PM announces tax reforms package, amnesty scheme for non-filers and undeclared assets

ISLAMABAD: Prime Minister Shahid Khaqan Abbasi announced a reduction in income tax rates and an amnesty scheme aimed at broadening the government’s revenue base.
Announcing that all 120 million national identity card holders will be assigned tax numbers, Abbasi told a news conference in Islamabad: “If you don’t pay taxes, Pakistan will not be sustainable.”

He clarified that politically exposed persons (PEPs) and their families were not eligible to benefit from the scheme — valid till June 30.

“Under the amnesty plan, all Pakistanis will be able to declare their unreported income and assets and bring their money into the tax base after paying a 5 percent one-off penalty,” Abbasi said.
“This is some 2-1/2 months’ time you have to benefit from, and after that you will have to face the law,” the prime minister said.

Five-point tax reforms package

⯈ CNIC (Computerised National Identity Card) number to become NTN tax number.

⯈ Reduction of income tax rates:
     -Tax exemption on annual income up to Rs1.2m
-5% tax on annual income between Rs1.2 and Rs2.4mn
     -10% tax on annual income between Rs2.4 and 4.8mn
     -15% tax on annual income above Rs4.8mn
⯈ One-time tax amnesty scheme:
Citizens can declare previously undeclared:
     -Local liquid assets at 5% penalty;
     -Foreign cash assets at 2% penalty;
     -Assets/fixed property abroad at 3%;
     -Dollar accounts can be declared and kept abroad at 5% penalty
⯈ Property sector tax reform:
The government says most tax evasion occurs in real estate transactions. There are huge gaps in property values and the amounts at which they are registered, said the prime minister.
-1% Advance Income tax on all property transactions
-Advance tax to be adjusted in income tax liability
-Federal govt to recommend maximum 1% local, provincial taxes
-Govt can buy property by paying 100% above declared value
⯈ Monitoring of taxpayers:
Govt to monitor financial records of citizens and issue notices if it finds tax evasion. Parliament to decide penalties.

Prime Minister Abbasi while giving details of the proposed reforms package, said it was aimed at generating additional revenue and the Computerized National Identity Cards (CNIC) of 120 million citizens would be considered as their national tax numbers.

Discussing the tax rates on different income tiers, Abbasi said that income up to Rs0.1million per month will not be taxed. A ten percent tax will be levied on annual income between Rs2.4-4.8mn. And annual income above Rs48million will be taxed at a 15-percent rate.

Under the new one-time tax-amnesty scheme, local and foreign assets in the shape of cash could be whitened by paying five percent and two percent penalty, respectively, on the undeclared assets. The premier added that off-shore company is an asset and it must be declared. Those bringing back foreign assets or declaring local ones will not face further scrutiny or levy.
Abbasi said as people hid their assets by injecting black money in property and then declaring the same much less than the original value, the government had proposed to impose one percent tax on property, which could be adjusted in the overall annual income tax. The federal government would also ask the provinces to lower the rates to one per cent to discourage under value declaration, he added.
The prime minister said in order to check the understatement of property value, the government would have the right to purchase a property on double the value declared by the owner during the year 2018-19, at 75 percent more in 2019-20 and at 50 percent more in 2020-21.
A widened current account deficit has prompted analysts to suggest the country may need an International Monetary Fund bailout in the next 12 months. Abbasi said he was aware of the challenges.
“We have been in a growth phase. There are current account challenges. We are tackling that,” he said.

Abbasi said that he will hold another joint press conference with Federal Adviser on Finance, Revenue and Economic Affairs Miftah Ismail and present statistics in the coming days.