In a major development, the government has decided to enhance the basic income tax exemption limit to Rs 500,000 from the existing Rs 400,000 for the salaried class in the budget for the financial year 2016-17, Dawn has learnt. Last time, the exemption threshold was increased to Rs 400,000 from Rs 350,000 in the 2012-13 budget. A well-placed source in the Federal Board of Revenue (FBR) told Dawn that significant changes were also proposed in income tax slabs. The relief will be mostly given to the salaried class in lower brackets.
The source said the government was also considering introducing two new laws for declaration of foreign assets and control of foreign exchange. One of the laws will provide legal cover to the people who have not yet declared their overseas income and assets. At present there is no law which binds a person to declare foreign assets. The source said the draft law on voluntarily declaration of assets will be part of the budget. About 20 countries, including the US, Britain and India, have such laws to document overseas assets of their nationals.
Asked about the legality of undeclared assets, the source said the government in consultation with opposition parties would have to come up with some amnesty scheme. However, the source added, it would be difficult for the government to announce the scheme in the budget because of deadlock over the Panamagate issue. The undisclosed overseas assets to be covered in the proposed law will be immovable such as property. The proposed law — Undisclosed Foreign Income and Assets Bill 2016 — has already been vetted by the law division. It has been proposed to allow whitening of undeclared foreign assets of Pakistani nationals at a tax rate of 15pc without payment of any penalty.
Some tax officials are of the opinion that the government can extend the scheme to non-public office holders. According to the draft law, in case of non-declaration of assets held outside the country, the assets of equivalent value in Pakistan should be forfeited under the provisions of the law, along with other severe penalties. The other law proposes an amendment to the Foreign Exchange Regulation Act (FERA) to get hold of the black money held abroad. Under a new section proposed to be inserted in FERA, if a person holds any foreign exchange, foreign security or any immovable property outside the country, the equivalent value of property in Pakistan can be seized by following a prescribed procedure.
The amendment was proposed to get hold of a person who is holding assets in a tax haven in violation of FERA. The power of seizure under FERA is in addition to the penal action under the Income Tax Ordinance 2001. The FBR will also put in place a tool box of measures to arrest the outflow from the country of untaxed money and assets which will include a close coordination with the State Bank of Pakistan and monitoring of outward remittances, the source said.
