Why the Prime Minister’s amnesty scheme has fallen short
If one was to take stock of amnesty schemes announced in Pakistan recently, this scheme is the first where the country’s Prime Minister has fully backed the effort, appeared on national television to explain its objectives and persuaded people to declare their hidden income and assets. In the last three decades, such a push for tax reform in the country has not been seen backed by the top political leadership.
But presently, only 300 people have taken the facilitation provided under the tax amnesty scheme. It seems the arrangement will bring in approximately PKR 500 million in tax revenues for the Federal Board of Revenue (FBR), which falls well short of the expected amount of PKR 200 billion.
Earlier this month, the FBR resisted sharing this information with Pakistan’s National Assembly Standing Committee on Finance, and claimed that it was not usually until the last week of the scheme that people began taking it seriously.
Still, with the expiry date nearly upon us, why is it that the Prime Minister’s appeal and offer of amnesty has not borne much fruit?
There are elements which could have enhanced the attractiveness of this scheme for the public, and saved the government from much embarrassment.
There remains a general lack of confidence in public sector information management and most people have found the government’s claims hard to believe.
Dr. Vaqar Ahmed
First, the timing of the amnesty scheme was not appropriate. The government was in a rush to offer amnesty as it knows that once it enters into an agreement with the International Monetary Fund, the latter would not allow any such provisions to tax evaders. The slowdown in the country’s economic activity has already prompted people to move into savings mode, and for the last two quarters, there have been low levels of savings going into formal and informal businesses.
Secondly, as the amnesty scheme announcement was not supplemented with the reform of the tax administration, an ongoing lack of trust in Pakistan’s tax machinery hasn’t done any favors to the scheme, or encouraged people to come forward.
On national television, the finance minister, revenue minister and FBR chief did try to assure the public that a wide majority of FBR officials would not have access to the information declared under amnesty, and so would not be in a position to harass current and potential tax payers. They said the information would only be the property of the unit dealing with proceeds under the amnesty scheme. But given the trust deficit, there remains a general lack of confidence in public sector information management and most people have found the government’s claims hard to believe.
Strategic communication is another weak area of the new economic team. There simply hasn’t been enough clarity in messages coming from the Prime Minister, the cabinet members, the FBR officials and many others in the government machinery. For instance, during his initial days, the FBR chief said he had stopped ordering raids on business people and that they would be respectfully invited and asked to present any information. And yet, days later he announced that criminal proceedings would be initiated against anybody not filing taxes.
He didn’t feel the need to qualify whether the vast majority of the population, which is not literate in financial matters, or those with difficulties accessing information, or those suffering from disabilities, or those who might be pensioners would also face criminal charges.