Tax amnesty schemes, anti-money laundering regulations and customer due diligence by financial institutes: an evaluation of the implementation issues in Pakistan

Nasir Sultan, Norazida Mohamed and Dildar Hussain

Qualitative Research in Financial Markets, 2022, vol. 15, issue 3, 534-550

Abstract: Purpose - Tax amnesty (TA) schemes are typical in developing countries. Governments’ claims and suppositions are continually heightened; however, this may differ in actuality. This study aims to present an overview of the effectiveness of TA schemes and the problems they raise in implementing anti-money laundering regulations. Design/methodology/approach - This study used a qualitative research design. Content analysis was used to analyse research articles, reports, legal documents and news articles. Findings - Every amnesty offered in Pakistan from 1956 to 2018 failed to meet government expectations. Instead, the continuity resulted in an irrepressible black economy. The black economy’s uncontrollability undermines tax collection and hinders a robust anti-money laundering regime. Significantly, tax holidays with discrepant legislation strengthen evaders, plunderers and launderers. These policies severely impede the implementation of anti-money laundering policies in the financial institutions of Pakistan. Additionally, Pakistan's geopolitical location, circumstance and war against terror cannot afford any policy that provides monetary relaxation to offenders. Practical implications - There is no concrete evidence to support long-term economic progress through the implementation of amnesty schemes as a revenue collection policy. This study evaluates previous studies and findings to understand the effect of tax amnesties on the financial industry of Pakistan. The findings have practical implications for tax collection authorities, policymakers and international financial bodies. Originality/value - Previous studies have discussed the advantages and disadvantages of Pakistan’s regular tax amnesties. However, this study discusses the implementation of TA schemes concerning anti-money laundering regulations and customer due diligence by financial institutes and provides suggestions to minimise its negative implications.

Keywords: Pakistan; Anti-money laundering; Black money; Customer due diligence; Financial action task force; Tax amnesty schemes (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:qrfmpp:qrfm-02-2022-0022

DOI: 10.1108/QRFM-02-2022-0022

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