FOR a number of days now, we have been hearing about a new set of laws that is in the works to enable the whitening of undeclared foreign assets, as well as strengthen the hand of government in pursuing those assets that are not declared.
In doing so, the government is deploying the oldest toolkit in the taxman’s armory. Amnesty schemes coupled with penalties for non-compliance have had a poor track record in Pakistan, and the outgoing fiscal year provides the clearest example. In the present case, however, two new laws are being considered.
One called the Undisclosed Foreign Income and Assets Bill 2016 will open a window for those who hold undeclared assets abroad to whiten them. And the second is an amendment to the Foreign Exchange Regulation Act, which would enable the authorities to seize an equivalent amount of property in Pakistan owned by anyone who is found holding undeclared foreign assets.
The plan had been in the works long before the Panama Papers controversy broke out.
The interesting thing is that the plan has been developed by the Tax Reforms Commission, one of whose members — Senator Osman Saifullah Khan — was named in the Panama Papers, and given the details in his asset declaration to the ECP, will likely be one of the beneficiaries of the whitener scheme.
So one question to ask is: what happened to previous whitener schemes? Did they produce any results in terms of getting more incomes to be declared? Considering those who are most likely to benefit from such schemes are the same ones who draw them up, it should not come as a surprise that they accomplish nothing. It was a stroke of bad luck for the senator to find himself in the limelight.
Fact of the matter is, just about everybody in the room when such schemes are hatched, have something or the other in the closet.
If the government is working to strengthen the law in order to enable the authorities to pursue those who have accumulated tax evaded wealth, then the package of measures they are working on should be alright. But if they are going to play the old carrot-and-stick game again, we all know how that one ends. Usually it is all carrot and no stick.
The helplessness of the government is once again in full display if a whitener scheme is going to be part of any reforms undertaken to control the accumulation of foreign assets.
At the very least, there ought to be some sort of penalty for whitening undeclared assets. Of course, in a better world we would see all those with undeclared assets undergo an audit to determine whether or not they have concealed sources of income. But that is a wish for another time.