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The council of Textila Association's suggestion

By AMANULLAH BASHAR
Jan 31 - Feb 06, 2000

Despite several reforms introduced by different governments in the past to bring the huge informal economy into the ambit of documentation a good deal of untaxed money has yet to be brought into the tax net.

Various financial instruments like TFCs, FEBCs, FCAs introduced providing an opportunity to whiten the black money for the last several years, the growth of informal sector seems to remain unabated in the country. The unprecedented success of the lottery schemes, launched by the commercial banks was enough to indicate the existence of the undocumented and hidden money in our economy. The commercial banks had collected over Rs.40 billion through prize schemes.

The trade and business community continues to demand for various exemptions to remain out of documentation.

The present government which is making all out efforts to expand the tax net and to meet the revenue target of Rs340 billion for the current fiscal has recently announced an economic package which includes amnesty scheme to whiten the tax evaded assets and hidden money by paying 10 per cent tax. The Finance Minister Shaukat Aziz while announcing the scheme had fixed the last date for availing the scheme as March 31,2000. However an official notification in this regard has yet to be made by the government.

The amnesty scheme was announced by the finance minister in December last, however lack proper publicity on media to attract a desired response from the informal sector. Representative from various segments of the business community feel that in order to get a positive response, the amnesty scheme needs publicity on a much wider scale. They feel that the side of the informal economy which is almost parallel to the documented economy could be reduced by simplification of the tax procedures, reducing the rampant corruption through taxation reforms and reducing the number of taxes and tax collecting agencies.

Encouraged by the government scheme for amnesty declared by the Finance Minister, the Council of Textile Association (CTA) has suggested that all the banks accounts, whether current, saving or term deposits should be accepted as white money, without payment of any tax just like investment in Privatization Commission or repayment of defaulted loans if the depositor makes a declaration of the amount of his bank account or the amount invested in savings schemes.

The CTA Convenier SMA Rizvi in his proposals for the government's drive to bring the black money to surface said that the foreign currency accounts opened before December 16, 1999 and afterwards should be granted immunity so that people might bring as much money as possible from abroad for investment purposes.

Notwithstanding the wrong policies, adopted by preceding governments, we had a big currency weightage in deposits of 11 billion dollars in foreign currency accounts, he said.

He pointed out that the biggest impediment in formation of capital and declaration of assets is unjust, retrogressive, unislamic and discriminatory "wealth tax" which was responsible for encouraging black money. It retarded investment in industries and exports for the sake of hardly Rs1 billion tax after meeting the collection charges.

The successive governments has failed to realize the damage this tax was causing to the expansion of legalized economy.

The CTA convenor also suggested that the last date for declaration should be kept as June 30, 2000 to enable the government to carry out a big campaign.

Rizvi cited the amnesty scheme masterminded by late Dr. Mehbubul Haq, former finance minister and economist of international repute had identified 22 families which must have now multiplied many times.

He wanted to impose farm and agricultural tax Dr Mehbubul Haq had pointed out that Rs40 billion was siphoned off by the corrupt revenue collecting agencies.

Dr. Mehbubul Haq had also pointed out that APTMA business lords were paying only Rs200 million as income tax and taking a lion's share from the banks as loans.

Considering the demand of the business community for various relaxations, the government has responded positively by deferring the restriction of admissibility for tax purposes of input purchases of above Rs50,000 by payment through banking instruments till July 1,2000.

This measure was announced by the present government on December 17,1999.

This decision was taken in a meeting between a delegation of the Federation of Pakistan Chambers of Commerce and Industry(FPCCI) and Finance Minister Shaukat Aziz.

The delegation headed by FPCCI vice president Mahmood Ahmed explained to the minister that the business community was not ready to switch over to fully documented economy and to make all transactions through banking insruments. Therefore the traders needed some time for transition.

Now the legal amendments might take some time while all necessary instructions will be issued by the CBR in a single document.

Although the government has given a strong signal that the condition of making transactions through the banking instruments will not be further relaxed yet the huge size of the undocumented economy suggests that government keep constant efforts to bring the untammed economy into the tax net.