Whiten black money at 5pc: PM Imran Khan unveils yet another amnesty scheme

ISLAMABAD/LAHORE: The federal cabinet on Tuesday gave nod mod promulgation of an ordinance to offer a third tax amnesty scheme.

The finance ministry circulated a summary among the federal cabinet members on Monday for their approval of the scheme through the Income Tax Amendment Ordinance 2022. Under the amnesty, the government will allow industrialists to whiten their black money at a 5% rate by investing money in the manufacturing sector.

The government has decided to offer a 5% across-the-board tax rate and immunity to investors from the investigation about sources of investment. An investor will establish a new industrial unit through the creation of a new company to avail the tax amnesty scheme. Similarly, existing units can also avail the facility for balancing and modernisation. The cut-off date for availing of the amnesty scheme will be December 2022 with the condition of starting the commercial production in the new unit by June 2024, according to the decision.

Meanwhile, the government decided that those companies returning a net loss in the last three years will be eligible to be acquired by healthy profit-making companies, which will be incentivised to adjust the sick company’s tax losses for the next three years.

Separately, addressing a ceremony in Lahore on Tuesday, Prime Minister Imran Khan announced a five-year tax exemption for overseas investors to bolster investment in Pakistan. He said that countries progress from industrial development. “No country can become great without a manufacturing base and industrial growth,” he said.

“A country develops when there is wealth creation, without it they cannot move forward,” he said, adding that when a government forms policies against profit-making, it halts the development of industries and reduces investment opportunities. He explained when industries earn profit, other investors get attracted to that particular sector. He said that countries could not achieve progress only by producing and exporting wheat, vegetables and textile products.

However, according to the announcement, previous beneficiaries of amnesty schemes of 2018 and 2019 would not be eligible. Bank loan defaulters in the last three years would also not be eligible. Industrial units having accumulated losses in continuous three years would be treated as sick units. Acquiring company allowed to adjust losses of the sick units against its income for three years. Revival of the sick unit should be completed within three years of acquisition.

Pakistan citizens, who are non-resident for five years, and resident Pakistanis having declared foreign assets, would be eligible to invest. One-time tax credit equal to 100pc of PKR equivalent of remittance to be availed in five years. Investment to be made in a new industrial unit. New industrial unit would be in the forms of a company.

Sharing details of the package, the premier said that the growth of small and medium industries have been focused on, for which the government has introduced a policy and is creating facilities for the sector's growth.

During his address, he highlighted the issue of the rising current account deficit. “The biggest challenge that we face is of a current account deficit, which is triggered due to stagnant exports,” he said.

Pakistan’s current account deficit — the gap between the country’s higher foreign expenditure and low income — widened to a 13-year-high of $2.6 billion in January 2022 in the wake of a surge in import payments due to rising commodity prices in the international market. This was the highest-ever monthly current account deficit. The last time the figure was this high was back in October 2008 when it was $2.03bn. PM Imran Khan admitted that he should have announced an amnesty for the industries as soon as he was sworn as the prime minister back in 2018.

Expressing hope in the IT sector, he said that the most rapid growth would be seen in this sector; however, he regretted that we treat the sector like normal industries. “We are trying to make the country self-sufficient and the business community will play a major role in doing so,” he said.

He said that as against India’s US$140 billion annual IT exports, Pakistan was just hovering around $4 billion per annum, 70% growth achieved during the present government. “Lack of long-term planning, shortage of dollars, less or no growth in exports, forced the country to approach the International Monetary Fund (IMF),” he remarked.

“We are trying to make the country stand on its own feet,” he said and regretted that former governments remained dependent on aid and loans begged from the international financial institutions. He said that those countries which achieved self-reliance and development were able to make and pursue their independent foreign policies. The PM, in that respect, mentioned the country’s conflicting foreign policies during the Soviet attack on Afghanistan and then the US attack on Afghanistan after 9/11. “We should not blame the United States for the disrespect we have in the world but ourselves,” he added.