Another Tax Amnesty Scheme


Some of the populist measures like cutting back on prices of petrol and electricity announced by Prime Minister Imran Khan in recent days are very welcome from the people’s point of view, but others like the tax amnesty scheme for overseas Pakistanis raise some pressing questions that need to be answered; especially since similar experiments in the past did not do much by way of helping the economy. The blanket amnesty for the construction sector, in particular, had the exact opposite effect than stimulating housing, etc, for salaried classes since it opened the floodgates of black money into the whole industry, especially real estate, and pushed up prices far beyond the reach of the common man.
Now, once again, Pakistanis living abroad have been given a five-year tax holiday in return for using their money for the development of the country’s industrial sector. And while there’s nothing wrong with incentivising industry as such, there’s still a very big problem with sidelining genuine taxpayers and rewarding tax evaders, something which PTI stood firmly against once upon a time. Comparisons with similar schemes in countries like Indonesia and Malaysia don’t really apply here, because there these things were a rarity and also produced results worth writing home about; neither of which can be said about the way this window is used here.
There’s also something to be said about how these recent steps have been taken. Reduced petrol and electricity prices are likely to work wonders with voters, but only if they can be made to stick. According to reports, these things were not communicated to the IMF in advance; which means there could be unforeseen problems down the road. There’s little chance of the Fund agreeing if even only the very recent past is something to go by. Raising fuel prices and electricity tariffs were central parts of the bailout deal, and it is against amnesty schemes as a matter of policy, so things are far from clear despite the headline-grabbing announcements.
It seems now the government is not just taking a U-turn on its core vision and promises, it is also taking one on arrangements with the IMF, which means the whole deal still hangs in the balance. Things will become much clearer in a few days when the IMF team arrives in the country to discuss the next tranche.