KARACHI: Pakistan Business Council (PBC) in collaboration with the Institute of Chartered Accountants of Pakistan (ICAP) organised a seminar on the “Documentation of the economy” focusing on remittances under Section 111 (4) of the Income Tax Ordinance and the regulations governing foreign currency accounts.

In his introductory remarks, Ehsan Malik, CEO PBC highlighted the need to create a level-playing field between the formal and the informal sector to generate jobs, promote value-added exports and encourage import substitution.

Manufacturing which represents 13.5 per cent of GDP was carrying 58 per cent of the tax burden, Pakistan was losing share of world exports and the country was becoming import reliant. Industry was being undermined by presumptive taxes on heavily under-invoiced imports, which were facilitated by a combination of unchallenged outflow through foreign currency accounts. Black money was being whitened through Section 111 (4) which allowed remittances to escape challenge from tax accountability.

Shabar Zaidi, Senior Partner of A F Ferguson, in his keynote speech stated that it was by deliberate design rather than default that Section 111 (4), together with regulations on foreign currency accounts result in a perpetual amnesty and a money-whitening scheme. US dollars can be bought in the open market, deposited legally in foreign currency accounts, remitted freely abroad, then sent back to Pakistan and go unchallenged under the “no-questions asked” provisions of Section 111 (4).

He advocated controls over use of foreign currency accounts and checks on inward remittances above a certain reasonable limit. He warned that Pakistan faced dire consequences under the Financial Action Task Force classification, unless swift action was taken to close these windows.

An intense discussion then followed amongst the panel which included Arif Habib, Abid Shaban, Ashraf Tola and Shabar Zaidi.

Arif Habib stressed the need to promote investment in employment and export generating industries as well as in infrastructure. He felt that there were many policies that need to be aligned besides closing the scope of misusing Section 111 (4) and foreign currency accounts. Abid Shaban stated that the OECD Convention on Exchange of Information was going to be a real deterrent to maintaining undeclared assets abroad. Ashraf Tola warned of the risk of jeopardizing the level of remittances if undue checks were placed. The panel concluded that a comprehensive review of fiscal regime, separation of tax policy making from tax administration and plugging the loopholes would restore the credibility of Pakistan globally and promote investment. This sentiment was echoed by Riaz Chamdia, President of ICAP who thanked PBC for organizing the seminar.—PR