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Wealth tax law may be re-promulgated - Naveed Yaseen - 05-03-2009 06:49 AM
By Sajid Chaudhry
ISLAMABAD: A proposal for re-promulgation of wealth tax law for a limited period is on the agenda of Pakistan and International Monetary Fund (IMF) talks scheduled at Dubai during May 4 to May 11, official sources told Daily Times on Saturday.
A Senior income tax official while responding to Daily Times confirmed that restoration of wealth tax is on the policy agenda along with other proposals like carbon tax and gross asset tax that would be discussed with IMF authorities during the said talks.
Wealth tax law may be re-promulgated for two years only to give the rich a chance to legalise their “hidden wealth” by paying tax ranging from 2 percent to 10 percent. This was developed during Shaukat Aziz’s government. However, due to the strong resistance from rich, this proposal was dropped without taking it to the Special Federal Cabinet meeting.
The FBR authorities have initially discussed re-promulgation of wealth tax law proposal with top taxpayers and tax experts associations and there has been strong resistance from the taxpayers as they have shown serious reservations, official sources added. For the release of third tranche of around $800 million, IMF authorities would hold second review under $7.6 billion Stand-By-Arrangement (SBA) with Pakistani officials during May 4-11 at Dubai.
According to the official, both the authorities would hold technical level talks while analysing economic performance of Pakistan during October-December 2008 period that have been subjected to this review. Top officials from Ministry of Finance, State Bank of Pakistan, Federal Board of Revenue and Economic Affair Division would be representing Pakistan in technical review of economic performance at Dubai. It is expected that Shaukat Tareen, Advisor to Prime Minister on Finance and Revenues, Chairman FBR would be participating in policy level talks at Dubai.
It is expected that this proposal might form the basis of discussion on re-promulgation of wealth tax law aiming at not only increasing tax collection but also to increase the tax-to-GDP ration in the country. A team of officials who visited Turkey and examined the Turkish tax model had worked out this proposal. The FBR team has proposed that the wealth up to Rs 5 million, if declared under the re-promulgated wealth tax law, be legalised on payment of 2 percent tax.
The net wealth over Rs 5 million and up to Rs 10 million, if declared by the taxpayers or non-taxpayers, be legalised on payment of 5 percent tax. The FBR also proposes that if the rich disclose their un-declared wealth of over Rs 10 million and up to 20 million, the wealth may be legalised on payment of 7 percent tax and if un-declared net wealth over Rs 20 million and above is disclosed under the proposed law, it be legalised on payment of 10 percent tax.
Pakistan is under tremendous pressure due to the growing expenditures and declining tax collection and there is a consensus between the fund and Pakistani authorities to tax each and every income falling in taxable limits without further delay. The government had repealed the wealth tax law a few years back to encourage the people to invest in Pakistan and discourage them taking their wealth out of the country. The FBR, under the Income Tax Ordinance 2001, has the right to access the un-declared wealth, accumulated during the last five years, of existing taxpayers. Similarly, the law also empowers the FBR to assess the un-declared wealth of non-taxpayers who accumulated wealth during the last five years or before.
http://www.dailytimes.com.pk/default.asp?page=2009\05\03\story_3-5-2009_pg5_1