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PTI’s unconstitutional amnesties

Huzaima Bukhari & Dr. Ikramul Haq

The Federal Board of Revenue (FBR) on the last day of 2020, without any legal instrument, issued a clarification that the last date of ‘Prime Minister’s Construction Package’ was extended. The Presidential Ordinance [The Income Tax (Amendment) Ordinance, 2021] to this effect was promulgated on January 20, 2021, just 48 hours before the start of National Assembly and Senate sessions, and with retrospective effect (January 1, 2021). This public announcement should have been made only after the law is passed according to procedure provided in the Constitution of Islamic Republic of Pakistan [“the Constitution”]. 

FBR’s Press release issued on December 31, 2020 claimed: “The last date for seeking immunity by builders and developers from probing their source of funds and availing fixed tax regime has been extended from 31st December 2020 to 30th June 2021. Similarly, the last date for builders and developers who want to avail fixed tax regime has been extended from 31st December 2020 to 31st December 2021. The last date for completion of projects has been extended from 30th September 2022 to 30th September 2023 and last date for buyers of housing units and plots has been extended from 30th September 2022 to 30th March 2023”.

Before coming to power, top leadership of Pakistan Tehreek-i-Insaf (PTI) was calling tax amnesties as “immoral”, “undesirable”, “unlawful” and a “slap on the face of honest taxpayers”. After coming into power, the head of PTI and Prime Minister of Pakistan, took many U-turns, but the worst one was offering asset whitening scheme resulting into tax losses of billions of rupees as was the case with Foreign Assets (Declaration and Repatriation) Act, 2018 and Voluntary Declaration of Domestic Assets Act, 2018 passedby National Assembly in the last year of rule of Pakistan Muslim League (Nawaz)—PMLN.

As many as 135 persons, named in the Organisation for Economic Co-operation and Development (OECD) database, availed the 2018 tax amnesty scheme of the PMLN and declared Rs. 62.4 billion in assets. They paid only Rs. 2.9 billion, whereas, their actual liabilities could have been Rs. 43.7 billion. About 56 people, whose data was shared by the OECD, availed PTI’s tax amnesty scheme and declared Rs. 31.8 billion worth of assets. They paid only Rs. 1.7 billion and got a relief of Rs. 20.6 billion. Muhammad Ashfaq, then Director General of Directorate of International Taxes of the FBR and now Member Operations Internal Revenue Service (IRS), FBR, told the Standing Committee of National Assembly on November 7, 2019 that the total tax collection in 325 cases against $5.5 billion worth of foreign assets caught in the OECD web was only Rs. 5.6 billion or 0.64% of the traced assets. Indeed a startling revelation!

It was conceded by then Chairman FBR, Syed Muhammad Shabbar Zaidi, who drafted and defended PTI’s amnesty scheme and even praised the earlier one by the PMLN that in the absence of these asset-whitening schemes, they could have recovered 70% of value of concealed assets as per provisions of Income Tax Ordinance 2001. It provides maximum income tax of 35% along with 100% penalty, bringing total tax liability to 70% of the value of assets and further amount of default surcharge that could have been negotiated for compounding of offence under section 202 read with section 192A of the Income Tax Ordinance, 2001 for concealment that provides punishment of Rs. 500,000 or more with imprisonment up to two years or with fine or both.

The PTI Government earlier had been proudly taking credit that it received information of around 152,000 bank accounts owned by 57,450 Pakistani nationals, having $7.5 billion in bank deposits. In fact, bulk of this information was received much before the PTI came into power. The tall claims of Premier Imran Khan, especially of reopening the cases of beneficiaries of asset whitening scheme of PMLN were exposed when his Government bypassed the Parliament and notified its asset/income/expenditure whitening scheme—Assets Declaration Ordinance, 2019—througha Presidential Ordinance on May 14, 2019. It was later made part of Finance Act, 2019 that was unconstitutional in view of judgement of Supreme Court in Workers Welfare Funds m/o Human Resources Development, Islamabad through Secretary and others v East Pakistan Chrome Tannery (Pvt.) Ltd through its GM (Finance), Lahore etc. and others [(2016) 114 TAX 385 (S.C. Pak.)] holding that such laws cannot be made part of Money Bill  not covered  Article 73(2) of the Constitution.

Asad Umar, former Finance Minister of PTI and Chairman of the Standing Committee on Finance as he was at that time, now the Minister for Planning, Development Reforms and Special Initiatives, according to a report, criticised the “idea of introducing amnesty schemes to enable citizens to whiten undisclosed assets, saying “they show the “weakness of state” against tax evaders”. He added: “This tells why all political parties love to give tax amnesty schemes and also shows the elite capture of Pakistan’s economy and politics”.

Ignoring the remarks of Asad Umar, the coalition PTI Government gave yet another amnesty to developers and builders and buyers through another Presidential Ordinance [The Tax Laws (Amendment) Ordinance No. 1 of 2020] promulgated on April 17, 2020 and then made part of Finance Bill 2020, passed by the Parliament in violation of Article 73(2) of the Constitution as elaborated by the Supreme Court in [(2016) 114 TAX 385 (S.C. Pak.)]. It received the assent of President on June 30, 2020 as Act No. XIX or 2020.   

It may be recalled that in the third quarter of Fiscal Year 2019, due to wrong tax policies of the coalition Government of PTI in Finance Act 2019, according to a report,  under former Chairman FBR Shabbar Zaidi, construction sector witnessed a sharp contraction of 7.6% in fiscal year (FY) 19 from 8.2% growth during FY18”.

Prime Minister of Pakistan in a brief televised address on the last day of 2020 announced extension of amnesty whereas actual law to this effect was passed after twenty days! Earlier in a Press conference on April 3, 2020, Prime Minister announced what he called a “comprehensive relief/stimulus package” for the construction sector.

The Chairman, Association of Builders and Developers of Pakistan (ABAD), termed the tax incentives announced by Prime Minister Imran Khan as “a historic package for the construction industry of Pakistan and this package will prove a turning point for the economy of Pakistan”. In a statement, he said that ABAD was demanding incentives for the construction sector “because more than 70 allied industries are depending on construction sector.” He said, “We are indebted to Prime Minister for reviving the construction industry”.

The Premier said the government would provide “Rs 30 billion as subsidy on the loan for markup for low cost houses, with a maximum of 5% on five marla houses and 7% on ten marla houses”. He also pledged to provide a grant of Rs. 300,000 each for the construction of first 100,000 houses. The Premier claimed that “the PTI government was the first, after 1960s, to work on promotion of industry for revenue generation, retirement of debt and creation of jobs”.

By December 31, 2020, 186 projects were registered with FBR, while projects worth another Rs 116 billon were in the pipeline. Additionally, 163 projects were launched in Punjab, whereas proposals of Rs. 136 billion were in the process of approval. Prime Minister claimed that in the Punjab alone economic activity of Rs. 1500 billion would be generated with creation of 250,000 new jobs.

The Prime Minister said similar projects were in different phases in Khyber Pakhtunkhwa, Sindh (mostly in Karachi) and Baluchistan. He mentioned that after the approval of foreclosure law, the banks would be extending loans for construction of houses for the low-income groups. He said, under the scheme, the banks would extend loans worth Rs. 378 billion by December 2021.

According to a report, “the government had claimed there were another 900 candidate projects worth over Rs1 trillion that could avail the scheme after promulgation of the Ordinance”. The promulgation of Income Tax Amendment Ordinance 2021 extending amnesty for the rich and mighty developers and builders, who even after numerous amnesties, offered by successive governments in the past, cannot explain the sources of their investment, is lamentable, especially when workers engaged by construction industry do not even get any kind of social protection. The needy in the wake of Covid-19 endemic, millions below the poverty line, small businesses and sectors badly affected have been ignored by the Government of PTI in the very beginning of 2021 as no assistance/relief has been announced for them.


The writers, lawyers and authors, are Adjunct Faculty at Lahore University of Management Sciences (LUMS). 

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