The National Assembly passed a scheme for open ended tax amnesty on Wednesday.

It will allow people to keep 97% of their tax evaded money, a move which tax and legal experts say grants a free license for earning black money.

The scheme can be availed at any given time and is not limited to a specific duration.

People who avail this amnesty need to pay a 3% penalty as advance income tax to legitimize the remaining 97%.

The bill, called the Income Tax Amendment Act 2016 was pushed by the ruling party PML-N, through the lower house of parliament.

The 3% tax is only for realty based income and does not apply to other sources of income.

Further Details

Standard maximum income tax on individuals is 35%. Failing to pay the tax within the given time gets a 100% penalty. You are then liable to pay 70% of your income as tax. Because of this new scheme, people will only be required to pay 3% of their income.

This tax amendment has the potential to destroy Pakistan’s tax infrastructure completely according to tax experts. This new tax amnesty schemes offers a stark contrast to the tax amnesty scheme approved in India on Tuesday.

Comparison With Indian Tax Law

According to the Indian tax law, people with untaxed income will have to hand over 50% of it to the government while declaring their wealth. They will have to give another 25% of their income in a fund made by the government for benefiting the poor. They can however get the 25% back in 4 years.

If tax officials find someone with untaxed, undeclared income, the culprit is liable to pay 85% of their income to the government, according to Indian law.

Ishaq Dar in his defence said that the new tax scheme cannot be compared to the Indian tax scheme which covers every source of income.

A Similar Law Was Passed Back in 1992

This is not the first time the government has helped legalize illegal/tax evaded money. In 1992 the government (also under PML-N at that time) introduced the Protection of Economic Reforms Act.

The FBR cannot inquire the source of money if it is deposited in a foreign currency bank account according to this act. This allowed businessmen, industrialists and bureaucrats to whiten their black money according to court records of that time.