In a meeting with Prime Minister Shahid Khaqan Abbasi, the Pakistan Business Council (PBC) is reported to have again floated the proposal to offer an amnesty scheme to resident and non-resident Pakistanis with a view to encouraging them to bring back their foreign wealth to the country. According to the PBC – the representative body of leading business groups, this move could attract dollar 20 billion out of the dollar 150 billion said to be held by resident and non-resident Pakistanis abroad. The inflow of such a huge amount would support the fast declining foreign exchange reserves. The PBC also expressed the opinion that there was now little time left to enhance foreign exchange reserves through other means and encouraging Pakistanis to bring back their funds could be one of the few quick ways to replenish reserves, especially when there are now external and domestic pressures to deter the holdings of undeclared assets abroad. However, the Prime Minister is reported to have expressed his reservations because of the political implications of a tax amnesty. Another issue was the tax rate to be charged from those who opt for the amnesty to legalise their hidden assets. The delegation of the PBC also suggested the government to offer its three LNG power plants, one owned by the Punjab government, to non-resident Pakistanis for investment.

It may be mentioned that this is not the first time that such an amnesty scheme is suggested by the business community to the government to whiten the tainted and tax-evaded money held by them abroad. The reasons often advanced to support such a scheme include higher level of investment, increased output and rise in taxes, exports, etc., after the money kept abroad was brought back to the country and deployed for productive purposes. Another compelling reason this time is the growing current account deficit of the country which has forced the authorities to look for unconventional ways to replenish foreign exchange reserves of the country which have dwindled to uncomfortable levels. C/A deficit during FY17 was over dollar 12.0 billion and the external sector was under greater stress this year as the current account deficit widened to dollar 2.1 billion during July, 2017 as compared to dollar 662 million in the corresponding period of last year. On the fiscal front, both the budget deficit and total debt of the country are rising and there is a high reliance on short-term debt and foreign exchange borrowings to meet the budget deficit. However, it may be added that, contrary to the assertions of the PBC, there is great uncertainty about the amount of assets held abroad by Pakistanis as well as the total amount of foreign exchange likely to flow to the country to avail the tax amnesty scheme. In the past, such amnesty schemes failed to yield the desired results due to the anticipation of a more liberal scheme in future and weak enforcement by the Federal Board of Revenue. As for the amount stashed abroad, the estimates differ widely depending on the source of information and the purpose for which the figure is likely to be used. However, it needs to be realized that no firm estimates or reliable calculation could be made about such funds which are supposed to be hidden and largely untraceable. According to AF Ferguson, Pakistanis have parked about dollar 150 billion worth of assets abroad. Of this, dollar 40 billion is parked in real estate, dollar 40 billion in bank accounts, dollar 20 billion in shares and dollar 50 billion in the shape of other assets. Out of this amount, “dollar 3 billion to dollar 4.5 billion” can be repatriated to Pakistan if an amnesty scheme is introduced. This estimate is far less than dollar 20 billion quoted by the PBC. It may be noted that the business executives had also forwarded the same proposal to former Prime Minister Nawaz Sharif who had constituted a committee of all stakeholders to finalise the scheme. We are of the view that all pros and cons of the scheme need to be thoroughly examined this time before implementing such a proposal due to the generally poor experience of launching such schemes in the past. Such a scheme is not likely to succeed if the Pakistanis parking their money abroad think that no government will be able to trace these hidden funds.