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