LAHORE: Emphasising the importance of industrialisation for Pakistan’s progress, Prime Minister Imran Khan announced an industrial ‘amnesty’ package, which allows investors to put their money into new industries, no questions asked.
The PM made this announcement in Lahore, a day after announcing a dramatic cut in fuel and electricity rates, saying this was the first thing his party should have done after coming into power.
However, while the Pakistan Tehreek-i-Insaf prides itself on being a party focused on accountability and transparency, this would be the third amnesty package being offered to those who may be trying to legalise their ill-gotten wealth.
“We had decided at the start to focus on industrialistion, [especially]the export-oriented industry. But, I see now the amnesty we gave … we should not have given an open amnesty, we should have [instead]directed it towards industry,” the PM said.
Industrial amnesty scheme offers overseas Pakistanis five-year tax holiday
According to the summary moved by the Federal Board of Revenue (FBR), seeking the promulgation of the ordinance titled: ‘Ordinance for amendments in the income tax ordinance, 2001 via income tax (amendment) ordinance, 2022’, the package will render investors immune from disclosing the source of their money upon the payment of 5pc tax of the total amount.
Under the package, the investor will be liable to establish new industrial units by creating a new company. Similarly, the business community can also avail this facility for balancing or modernising its existing industry, according to the summary that was reportedly approved by the cabinet on Tuesday.
The government is yet to clarify that whether or not it discussed this move in detail with the International Monetary Fund (IMF) and obtained their go-ahead before making the announcement.
Justifying the need of an industrial package and the reason behind the promulgation of the ordinance, the summary explains that incentivisation of capital investment into various industrial sectors is common to most tax systems. The country, it says, has also provided tax incentives to the industrial sector through the introduction of special economic, export processing and special technology zones.
It further emphasised the need of similar benefits for all areas of Pakistan and envisaged that entrepreneurs would invest in industrial undertakings out of their undisclosed assets in a bid to create jobs and revive the sick industrial units. It sees it as imperative to incentivise non-resident and resident Pakistani individuals to repatriate their foreign exchange into the country and invest in the industry.
The summary explains that the matter came under discussion in a meeting with the PM on Jan 25. The package, which was finally approved in principle on the same date, consists of various incentives in new and existing industrial undertakings, revival of sick units, investments by resident/non-resident Pakistanis.
“The cutoff date for filing such declarations will be December 31, 2022 with a condition to start commercial production from the new unit by June 30, 2024. Similarly the package provides that those companies returning a net loss in last three years will be eligible to be acquired through acquisition (not amalgamation) by a healthy profit-making company, which will be incentivized to adjust the sick company’s tax losses for the next three years,” explains the summary.
Under the package, if eligible non-resident and resident Pakistani individuals repatriate their declared foreign assets into Pakistan for investment into the industrial sector, they would be entitled to 100 per cent tax credit for the next five years.
Commenting on the package, Dr Sajid Amin Javed of the Sustainable Development Policy Institute (SDPI) said the fate of the amnesty scheme announced for industry could be like the previous ones announced by this and preceding governments.
“I don’t see it being good for the economy, as people in Pakistan generally think that another amnesty scheme would come after this one. That is why they don’t join such schemes despite being offered very low tax percentage,” he explained.
He said the number of such schemes was very low in countries like India, Malaysia and Indonesia as compared to Pakistan, since they had succeeded in strengthening their systems and documenting their economies.
“I see this package as a political move and nothing more,” he feared.