- Wealth whitener scheme admission of governance failure
The suspicious timing and limited scope of the government’s latest ‘one-time-only’ amnesty package for foreign and domestic undeclared assets announced by the PM on Thursday in his economic reforms package are beyond logic and comprehension. They raise the usual questions regarding credibility, true purpose and possible person-specific intent, with high-profile corruption cases ongoing, elections just round the corner and a care-taker government due soon. Amnesty schemes are usually cosmetic window-dressing to mask government failure in effectively tackling the real, substantial weaknesses of the economy. From past experience, without political will and strict tax culture, such stopgap devices seldom achieve their objectives, while rewarding tax evaders in imposing absurdly minor penalties and being unfair to conscientious filers. The targeted ‘whiteners’ will be exceedingly wary in repatriating their funds from safe havens abroad without constitutional legal cover, as the memory of 1998 freezing of foreign currency accounts is still raw in investor psyche. A presidential ordinance and cabinet approval will not do.
Realisation of two broad goals is purportedly behind the last-gasp government move, namely the desperately needed broadening of tax base and enhancing perpetually dehydrated foreign exchange reserves, with June 30 the amnesty cut-off date. Making CNIC the national tax number will hopefully raise the taxpayers from existing 1.2 million individuals to 30 million, while offshore and local assets can be legitimised by coughing up between two to five percent of their value, and real estate, a paradise for ‘benami’ transactions, carries one percent presumptive tax with forced confiscation in case of undervaluation. As for tax exemption for those earning up to Rs1.2 million, it has rightly been termed a ‘puzzling move’, as this slab likely includes a substantial number of the overall 0.7 million taxpayers. As a conflict-of-interest sweetener, the scheme excludes public and political figures and their dependents.
The opposition (so far, PTI and PPP) is already up in arms against this hasty and probably short-lived measure, while the National Assembly’s committee on finance earlier passed a unanimous resolution against it. Amnesty schemes are fundamentally unsound in principle, unproductive in practice and ultimately, a win-win situation only for tax evaders.
