Staff Reporter :
In a bid to bolster the country’s economy amid the ongoing financial crisis, Finance Minister Abul Hassan Mahmood Ali has unveiled a bold proposal reintroducing the opportunity for legalising undisclosed income or ‘black money’ with a mere 15 per cent tax payment.
Minister Ali stressed the necessity of maintaining economic dynamism in the face of changing global economic conditions, he said while presenting the budget for FY 2024-25 before the august house on Thursday.
It is worth mentioning that the government in the fiscal year 2020-2021 had allowed the legalisation of undisclosed income with a 10 per cent tax.
Individuals under the current Income Tax Act have the option to legitimise their undisclosed funds by paying a maximum of 25 per cent tax along with a 10 per cent penalty on the taxable amount.
Furthermore, undisclosed funds can be utilised in property acquisitions with a location-specific tax.
However, government authorities retain the prerogative to investigate the source at a later stage.
Despite these provisions, the efficacy of bringing undisclosed funds into the formal economy remains limited.
Additionally, undisclosed funds can be invested in economic zones and high-tech parks with a reduced tax rate of only 10 per cent. Investors falling under this category are eligible for amnesty.
During the fiscal year 2022, individuals were permitted to repatriate their undisclosed funds abroad at a tax rate of seven per cent.
Regarding the whitening of black money, finance minister in his budget speech emphasised the need to stimulate effective demand within the economy, citing the importance of generating ample public spending and sustaining private sector activity.
“It is necessary to keep the country’s economy dynamic in the changing economic situation due to the ongoing global crisis. In order to generate and sustain effective demand in the economy, we need to provide more revenue on the one hand to generate sufficient public spending and on the other hand to keep the economic activity dynamic in the private sector,” he said.
Regarding the complications of the introduction of Data Verification System (DVS), the minister said, “Incidentally, it has created legal complications in the disclosure of undisclosed income and assets of various companies.”
“Moreover, due to unavoidable reasons including ignorance of the taxpayer in filing the return, there may be errors in showing the acquired assets,” he continued.
Under such a situation, the minister in his speech proposed to add a clause on tax incentives in the Income Tax Act with a view to providing taxpayers with an opportunity to correct this error in their income tax returns and to increase the flow of money into the mainstream of economy.
However, economists have always slammed such move because such scope shields the people who try to evade taxes which are highly essential to inject the country’s economy.