Can P.M. Abbasi’s latest policy help bring undeclared wealth back to Pakistan?
Prime Minister Shahid Khaqan Abbasi has announced an amnesty scheme for people holding undeclared wealth at home or abroad. Out of the fear inspired by Pakistan’s perennial political instability, a lot of Pakistanis lean on money-laundering to stash their dollars abroad. Pakistan didn’t get the benefit of the global hike in growth in the 1990s because its politicians were pulling down each other’s governments. P.M. Abbasi set the record straight by saying that the PMLN government after 2013 couldn’t hold the economy together because of the “dharna” politics, which disrupted economic function and scared away foreign investment.
There is a lot of Pakistani money lying abroad. Those who keep it in Pakistan don’t pay income tax because of the difficulties of dealing with an extractive Federal Bureau of Revenue. Shockingly less than one percent pay income tax and the government has to rely on indirect taxation which hits the common man. The government has thought of amnesty—bring your illegal money back and it becomes legal after paying a small “fee”—in consultation with private sector organizations that deal with wealth. Most of them support the program despite doubts about the capacity of the state to handle its consequences. The example of Indonesia was inspiring: the money brought back after amnesty was $42 billion.
But politics may get in the way. Imran Khan, campaigning in Sindh, has already announced that when he comes to power after 2018 he will scrap the scheme. This was not a good thing to say because the people being wooed by amnesty could panic and not risk their wealth. Another PTI leader announced that the amnesty announced through an executive order was not valid and that it will have to be endorsed by Parliament. Although the government says it will bring the amnesty order to Parliament, many will be skeptical. Yet, given the coming international clampdown on money–laundering, Pakistan may still manage to get back the dollars stashed away by Pakistanis scared of their homeland’s internecine politics.