Thursday, August 18, 2022

Asset Declaration Ordinance 2019, a critical analysis


Adil Ghaffar
Experienced Chief Executive Officer with a demonstrated history of working in the financial services' industry. Skilled in Negotiation, Business Planning, Microsoft Word, Accounting, and Team Building. Strong business development professional with an ACA focused in Accounting and Finance from institute of chartered accountants of Pakistan. Contact: [email protected]

Government of Pakistan (GOP) in its effort to bring in Documentation of Economy and to broaden the tax net has once again floated a new tax amnesty scheme 2019.

In order to gain maximum, let us evaluate this scheme critically.

  1. This scheme is for:

a. un-disclosed assets the value of which has been un-reported, under-reported or under-stated.

b. Un-disclosed expenditure means any un-explained or un-accounted expenditure upto tax year June 2018; and

c. Un-disclosed sales means sales or supplies chargeable to sales tax or FED Act.

  1. The period of acquisition of any un-disclosed assets, un-disclosed sales and un-disclosed expenditure has been restricted to June 30, 2018 with exception given to Benami assets held upto the date of declaration.

a. Why out of 4 categories only 1 allowed after June 30, 2018 till the date of filing of declaration?

b. By indicating June 30, 2018 are we sending a silent message that these amnesty schemes will be available from time to time?

3. This scheme is floated for a short period till June 30, 2019 but can be benefited till June 30, 2020 with surcharge.

  1. Section 8 stipulates conditions for declaration. In sub section (a) & (b) it is required that cash/foreign currency declared should be retained in bank account till June 30, 2019. It is basically to avoid persons claiming amnesty twice with the same cash/currency.
  2. Section 11 excluded certain persons, assets or proceedings from taking benefit of this scheme.

a. Why public limited companies excluded as these companies might have tons of properties at under declared rates which were in place at the time of it’s incorporation, particularly when Section 7 allow to incorporate in books of account;

b. Any proceed or assets that are involved in or derived from the commission of a criminal offence. This means that declarant has to disclose its source of income which will be subject to audit. In less than 2 months how this can be achieved? This clause will restrict prospective persons to declare and benefit from amnesty scheme. Particularly, when we read this clause with Section 12.

c. Similarly, gold and precious stones and bearer prize bonds be also made part of scheme with conditions attached to sale/repurchase gold through PMEX and prize bonds could be monitored through numbers;

d. Clause 11(f) appears as if bearer assets has been denied, but it seems that inclusion of shares and certificates, which are in electronic book entry system with proper audit trail, has been incorrectly mentioned therein.

Read also: How are nations influenced by being incorporated into blacklist of tax havens?

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