Financial managers, economists and legal experts in Pakistan are facing a serious question: does the amnesty scheme introduced by the government to whiten black money by paying one percent tax is legal or illegal and that this step by the holders of black money should be regarded as tax compliance or tax evasion. Whenever the government in the office introduces such a scheme, it invites criticism from various circles that government is giving a legal cover to money-laundering. However, the other way round, when the government takes hard steps to bring the rich people under tax net, capital starts flying from the country to land in Dubai, Malaysia or Switzerland. The government has opted for a short cut to enhance tax net, but it is better than a long cut if the country loses money no matter it is black or white. The amnesty schemes will give legal cover to utilize the money within the country. According to some other experts, the scheme will bring up to 100,000 new taxpayers under the tax net. The scheme was first introduced in the country in 1958 in which an amount of Rs1.120 billion was declared by taxpayers. Ten years later, this scheme whitened Rs920 million and again in 1976, at least Rs1.5 billion. The economy enormously gained through the schemes introduced in 1985, 1991 and 1998 as the money was invested within the country under legal protections.
Former president Pervez Musharraf also announced a tax amnesty scheme in 2000 which resulted in recovery of Rs10billion on the declaration of assets and another scheme offered in 2008 raised Rs3.16billion. According to some experts, there is no need to give a special amnesty scheme as there is a permanent window for money whitening under section 111 (4) of Income Tax Ordinance 2001. But it is to be noted that tough laws always support corruption as the official concerned exploit the laws in their favour, giving least chance to the taxpayers to find a legal remedy. According to the government circles, the scheme does not cover assets and only allows whitening of business capital held by retailers and wholesalers,leaving a little room for corruption. It is hoped that the scheme will help bring one million new taxpayers into the tax net. Under the scheme, the non-filersare allowed to whiten their undeclared profits by paying a onepercent tax and filers are also encouraged to pay nominal tax on declaration of turnover for four years.
At least 3.6million commercial companies are working in the country having a big contribution in the gross domestic product, but their share in the tax collections is very low. The government should register every business in the country, including shopkeepers and vendors. A fixed tax scheme can be introduced for them.
