Amnesty on forex assets sought in Pakistan

KARACHI: Amnesty of foreign exchange sought in the forthcoming federal budget to lure overseas foreign exchange assets of both resident and overseas Pakistanis.This was suggested by Institute of Chartered Accountants of Pakistan (ICAP) to Ministry of Finance. The ICAP proposed that an amnesty of forex be announced in the federal budget by charging 10 per cent income tax.The ICAP in its pre-budget memorandum submitted to Central Board of Revenue has said, "Amnesty on declaration of foreign assets should be announced through finance bill -2005."Financial year 2005-2006 will be the first year of second generation reforms programme and this year pre-budget exercise has been started a bit earlier and senior officials of CBR have started both formal and informal consultations with top tax experts of the country and seeking their suggestions.In 1985 the then federal finance minister late Dr Mehboobul Haq announced famous forex amnesty by issuing foreign exchange bonds.For the first time in the economic history of the country forex amnesty was granted in mid sixties. The ICAP said, "The amnesty would be for a period of one year during which foreign assets declared may be taxed at the rate of 10 per cent."The ICAP alleged that at present foreign exchange dealers are misusing the facility of income tax exemption granted under Sub-Section 4 of Section 111 of the Income Tax Ordinance. Under this Section tax exemption is allowed to those senders, who used banking channels for their remittances.The ICAP suggested that this concession might be withdrawn because moneychangers are misusing it. The ICAP said, "This provision is being largely misused by the persons involved in foreign exchange business."Moreover, the provision is also refraining persons from being enrolled or included in the tax net. The ICAP suggested that this Section should be abolished from first July 2005.The ICAP has further suggested that CBR Circular number 11-1998 should be taken back as it discourages promotion of documented economy by allowing cash receipts and cash payments by the trading and manufacturing concerns.CBR vide its circular number 11-1998 clarified that the section 21(1) of the Income Tax Ordinance, 2001 is not applicable to the expenditures chargeable to the trading and manufacturing accounts.It requires that any expenditure that exceeds Rs50,000 made other than by a crossed cheque or crossed bank draft shall not be allowed as deduction in computing income from business.●