World Economy

Pakistan Promotes Tax Amnesty

Pakistan Promotes Tax AmnestyPakistan Promotes Tax Amnesty

Pakistan is hoping to bring an end to years of rampant tax evasion with an ambitious amnesty that the government of Prime Minister Shahid Khaqan Abbasi is presenting as a major economic reform.

Pakistan has generally been embarrassed by its failure to get wealthier citizens to pay income tax. An amnesty running until June allows nationals to launder their wealth by paying 2% on funds declared outside the country, and up to 5% on those inside, Nikkei reported.  

Whenever officials have taken institutional advice on tax reform from the World Bank, the International Monetary Fund, or the Asian Development Bank, they have always been reminded that less than 1% of Pakistanis pay income tax.

The issue has become more acute with growing international pressure from the US and other western countries to tackle money laundering, which requires coming down hard on tax evasion.

The Paris-based Financial Action Task Force will decide at the end of June whether to put Pakistan on a grey list or a black list of countries that have failed to prevent money laundering and the financing of terrorism.

“The FATF threat is one of the most serious to Pakistan in many years,” a European ambassador in Islamabad told the Nikkei Asia Review. “Pakistan has to be seen to have begun taking action against money laundering and tax evasion.”

“If you don’t pay taxes, Pakistan will not be sustainable,” Prime Minister Shahid Khaqan Abbasi warned his compatriots on Apr. 5 when he announced the amnesty.

“Pakistan has to take action now ahead of the June FATF deadline,” a senior government official said at the same time. The official said bringing more taxpayers on board is essential as Pakistan seeks to borrow $60 billion from China and commercial sources for the China-Pakistan Economic Corridor.

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