The National Assembly has passed a bill to amend the Income Tax Ordinance, 2001, giving a new opportunity to traders and others who matter to whiten their black money up to Rs 50 million by paying 1 percent tax. The statement of objects and reasons of the bill point out the factual situation of the undocumented economy and a large number of traders are reluctant to file their income tax returns or hide their actual income, causing billions of rupees annual losses to the national exchequer. The government believes there is a need to change the prevailing culture of tax avoidance and under-reporting and has to give legal cover to its measures to bring the non-filers into the tax net. The government believes the tax amnesty will not only regularise the tax affairs by offering simplified procedure for tax assessment, but will also enhance the number of taxpayers.
However, the critics believe the amnesty scheme will be an injustice to the honest and committed taxpayers who regularly pay their taxes on time and the scheme is also in clash with the government objectives to enhancetax revenues. According to them, there is a need to change the fundamental reasons which lead to the introduction of such a scheme and the amnesty at one percent rate is also to meager to be allowed. Until some structural changes are incorporated in the tax collection system, the government will have to offer amnesty schemes one after another. However, the critics of the scheme forget the core point which forces the governments not only in Pakistan, but the world over to launch amnesty schemes. There are foreign banks and tax havens which offer attractive opportunities to the holders of black money and corrupt elements to deposit their money with them and enjoy the profits without going through any official rigmarole. There are not just traders involved in the business, but people from all walks of life, including government officials are the clients of the foreign banks.
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It is the time the government should reduce the number of indirect taxes and curtail the rates of direct taxes to encourage people to file their income tax returns. A mechanism of check and balance should also be introduced in the government departments to curb corruption and accumulation of black money in the hands of fraudulent cadre. A transparent system of taxation and reduction in the number and rates of taxes will help boost economy as the example of the United Arab Emirate and other gulf states is before us.
