Pakistan: Economy under Elites – Tax Amnesty Schemes, 2018

Abstract

The purpose of the paper is to take an incisive glimpse into Pakistan’s political economy through the lens of a tax policy abnorm i.e. the tax amnesty scheme, 2018. The paper is theoretically anchored in the elitist framework which arguably best explains structural composition of the economy. The paper refines the elitist framework, accentuates its significance, and innovates on it to induct the competing Freudian concepts of “pleasure principle” and “reality principle” to sharpen our understanding of Pakistan’s political economy. It is argued that impending inflows of offshore bank and financial account information of Pakistan resident persons under the OECD’s Multilateral Convention was the main dynamic of the amnestization initiative in which the Supreme Court of Pakistan played the role of the agent provocateur. The empirical results obtained help conclude that the amnestization initiatives have helped proliferate underground economy, and enhance the elitist economic status quo in Pakistan.

Tax amnesty schemes, anti-money laundering regulations and customer due diligence by financial institutes: an evaluation of the implementation issues in Pakistan

“…The confidentiality offered by the TA negates FATF’s Principle 2. For example, stringent confidentiality was embedded in the 2018 TA scheme, which is in non-compliance with Section 216 of the Income Tax Ordinance, 2001, the Right of Access to Information Act, 2017 and “any other law for the time in force” (Ahmed, 2019). This shows that anti-ML laws and regulations are also suspended from providing TA schemes.…”

“…The jurisdictions also use special measures like tax amnesty (TA) schemes to augment revenue collection and encourage voluntary compliance (Ibrahim et al, 2018;Luitel and Tosun, 2014). In addition, TA schemes are used in the tax reform process (Ahmed, 2019;Hasseldine, 1998). A TA is defined as a limited-time opportunity provided by the government to pay a defined outstanding amount to avoid monetary penalties and legal prosecution stemming from a tax liability (Ahmed, 2020;Le Borgne and Baer, 2008).…”

“…In addition, TA schemes are used in the tax reform process (Ahmed, 2019;Hasseldine, 1998). A TA is defined as a limited-time opportunity provided by the government to pay a defined outstanding amount to avoid monetary penalties and legal prosecution stemming from a tax liability (Ahmed, 2020;Le Borgne and Baer, 2008).…”

“…It is argued that TA might accelerate revenue collection provisionally; however, there is no significant long-term impact, and the contribution to expanding the tax net is negligible (Ahmed, 2020). With a total population of over 220 million, Pakistan has only 6.2 million people registered with national tax numbers (NTNs), with only 2.5 million filing tax returns (Rana, 2020).…”

“…Because of the black economy in Pakistan, TA programmes are not effective (Kar and Freitas, 2012). This allows the recalcitrant tax dodgers to escape penalties by taking advantage of the TA (Ahmed, 2020;Waris and Abdul Latif, 2014). However, it can be argued that this practice would also facilitate ML.…”