Legalisation of hidden assets: market value to be accepted as declared by taxpayers

[Naveed Yaseen]

RECORDER REPORT
ISLAMABAD (July 11 2008): The Section 68 of the Income Tax Ordinance 2001 would not be used for calculation of fair market value of the undeclared assets as amnesty scheme is in vogue for legalisation of hidden assets.

Responding to a query, FBR Member Facilitation and Taxpayer Education (FATE) and official spokesperson of FBR Khawar Khurshid Butt told reporters on Thursday that amnesty scheme is a kind of Universal Self Assessment (USAS) scheme giving an excellent opportunity to the persons for legalisation of assets on payment of merely 2 percent tax.

"Whatever being declared by the person, would be acceptable to the department and relevant provision of the Income Tax Ordinance would not be applicable in case of amnesty scheme," he said.

The Section 68 (fair market value of property) of the Ordinance 2001 says that the fair market value of any property, asset, service, benefit or perquisite at a particular time shall be the price which such property/asset would ordinarily fetch on sale or supply in the open market at that time. Where the price in the open market of asset is not ordinarily ascertainable, such price may be determined by the Commissioner of Income Tax, section added.

Officials said that the said section would not be used for the calculation of fair market value of the undeclared assets under the amnesty scheme. Thereby, the assets would be legalised on the fair market value being declared by the taxpayers.

It is important to mention that if the department cannot work out fair market value under Section 68 of the Ordinance 2001, who would determine such value? Responding to the question, officials said that the value would be accepted as declared by the taxpayer.

Officials dispelled the impression that there might be disputes between the tax department and the taxpayers on the issue of declaration of assets on fair market value basis.

The FBR has received a number of representations on different issues pertaining to amnesty scheme, which would be duly clarified by the FBR Direct Taxes Wing.

Officials said that the regular or normal business income would not be covered under the amnesty scheme. The persons earning normal business income would be required to pay the applicable rate and file the income tax returns.

Presently, the cost of legalisation of assets in the open currency market comes to around 2 percent. Thus, it would be better to legalise assets using amnesty scheme instead of going to the moneychangers for conversation of currency/remittances purposes, they said. FBR Member Fate said that the board would launch an effective media campaign for educating general public.

The scheme would also be prominently displayed on the FBR official website and advertisements in the print media.

The FBR has estimated to collect an amount of Rs 2 billion revenue from the amnesty scheme, as good response has been witnessed in the initial stage of launching of the scheme, Butt added.

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