Panama Papers: FBR moves against ‘owners’ of offshore companies

Published: September 4, 2016

ISLAMABAD: Tax authorities have started sending letters to over 600 Pakistanis, who, according to the Panama Papers, own offshore companies, though chances of recovering due taxes from them are slim owing to legal lacunae.

“This week, the Federal Board of Revenue (FBR) has begun the process of sending letters to hundreds of Pakistanis who have been named in the Panama Papers,” said FBR spokesperson Dr Mohammad Iqbal on Saturday.

“These people have been requested to confirm whether they own these offshore companies or not,” he added. The letters have been sent under Section 176 of the Income Tax Ordinance, which empowers tax officials to seek information about any transaction. However, the penalty for not giving information under Section 176 is mere Rs25,000.

The decision to send notices to about 600 Pakistanis coincided with Pakistan Tahreek-e-Insaf’s ‘Pakistan March’ against the government over alleged corruption and delay in taking action against those who have been named in the Panama Papers.

Three scions of the ruling Sharif family are among those accused by the Panama Papers of secreting money in offshore tax havens. Dr Iqbal did not confirm whether letters had also been written to the premier’s daughter, Maryam Nawaz, and his two sons, Hussain and Hasan Nawaz. He said letters were written to all those whose addresses were available.

Since the addresses of the Sharif family are known, letters have also been sent to them, according to sources in the FBR.

Legal experts argue that these letters would give a safe exit to the Sharif family.

In April this year, the International Consortium of Investigative Journalists (ICIJ) published a fraction of the data leaked under the Panama Papers investigation, naming about 640 Pakistanis as the beneficiaries of offshore holdings. Holding an offshore company is not unlawful but evasion of taxes and hiding income is a crime.

Immediately after the revelations, FBR’s intelligence and investigation wing had sought permission to move against these people, said sources in the FBR. However, Chairman Nisar Mohammad Khan did not allow the wing to take any action.

PTI Chairman Imran Khan alleged on Saturday that the FBR chairman did not take action against the Sharif family because he himself was laundering millions of rupees every month to Dubai – a charge vehemently denied by Nisar Khan.

FBR officials said even if these persons deny that they do not own offshore companies, their responses will be deemed as ‘declaration’, providing authorities a reason to further probe the cases.

On April 8 of this year, the FBR had also sent a notice to Prime Minister Nawaz Sharif under Section 176, seeking a clarification on receipts of foreign remittances from his son and their subsequent distribution among his family members. No subsequent action was taken.

Citing legal lacunas and a weak tax machinery, legal and tax experts say the FBR would not achieve anything by writing letters to these influential people. “The existing taxpayers would not entertain Section 176 notices due to universal self-assessment scheme of the FBR and also because the cases are time-barred,” said Supreme Court lawyer Dr Ikramul Haq.

Under the law, the FBR can open only up to five-year-old cases of income tax return filers – that too in case it has definite information about concealment of details of assets and incomes.

He said non-resident Pakistanis who do not have source of income in Pakistan would not be bound to reply to these letters. For filing income tax returns, non-resident Pakistanis will have to stay at least 183 days in Pakistan in a tax year.

“The prime minister’s sons will use this provision as an excuse. Thus, the letters will become a base for providing a safe exit to them,” Dr Haq said.

Published in The Express Tribune, September 4th, 2016.

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