The government is introducing an incentive for investment of untaxed money to boost fund flow into the flagging capital market amidst the COVID-19 crisis.
Published : 11 Jun 2020, 06:40 PM
Finance Minister AHM Mustafa Kamal proposed the initiative in his budget speech on Thursday.
“…With a view to providing impetus to the stock market, a major hub of economic activity of the country, individual taxpayers can invest money in the capital market between Jul 1 2020 and Jun 30, 2021 and show it in their tax returns on paying tax at a rate of 10 percent on the value of the investment subject to satisfying certain conditions including a lock-in period of three years, and no other authority including the income tax authority will raise any question in this regard,” he said.
In the FY 2011-12 budget there had been a similar 10 percent tax scheme for use of ‘black money’ investment in the stock market. That initiative had required a lock-in period for two years. This has been extended to three years in the newly proposed initiative.
The finance minister also proposed the addition of two incentive sections to the Income Tax Ordinance that would allow individuals to ‘whitewash’ undisclosed income and property.
“… Regardless of the provisions of any other prevailing law of the land, individual taxpayers will be allowed to disclose any type of undisclosed house property including land, building, flat, and apartment between Jul 1, 2020 and Jun 30, 2021 on paying tax at a particular rate on per square meter of the said asset.”
“Individual taxpayers will also be able to make any disclosure of undisclosed cash, bank deposits, savings certificates, shares, bonds or any other securities between Jul 1 2020 and Jun 30 2021 on paying taxes at a rate of 10 percent on the value of the said declaration; and no authority including the income tax authority can raise any question on such declarations.”
Minister Kamal pointed to the crisis caused by the coronavirus epidemic, the possibility of a global economic recession, and changing economic circumstances as the impetus for the decision.
“To face these challenges, we have to formulate and implement our financial policies for the upcoming fiscal year with utmost prudence and foresight,” he said.
“On the one hand, we need to generate more revenue to finance greater public spending to stimulate demand in the economy, and on the other hand, we need to provide impetus to the economic activities in the private sector. Extraordinary times demand extraordinary measures. “
Kamal excused the tax incentives as an opportunity for taxpayers to “amend mistakes” made due to “lack of adequate knowledge on tax return submission”.
The finance minister also proposed a new section to the Income Tax Ordinance to curb money laundering and tax evasion through under-invoicing, over-invoicing and declaration of false investments.
“According to the proposed provision, 50 percent tax will be levied on the proven amount of over- or under-invoicing, or on the proven amount of false declaration of investment,” the minister said. “I hope that the proposed provisions will be highly effective in curbing money laundering and tax evasion caused through acts of under-invoicing, over-invoicing, and false declaration of investment.”