Lawmakers want to rain hell on Paradise

But FBR cannot investigate cases more than five-year old, say experts

Shahbaz Rana November 08, 2017

ISLAMABAD: As a parliamentary panel on Tuesday asked tax authorities to swiftly move against those named in the Paradise Papers, the chances of any meaningful action remain extremely slim due to legal limitations on opening financial cases into alleged crimes that are over five years old.

Despite knowing its limitations after the Panama Papers leaked in April 2016, the federal government did not make any change in the Income Tax Ordinance of 2001 to make room for opening cases more than five years old. Since then, Finance Minister Ishaq Dar has presented two budgets in parliament.

The only way to swiftly move forward with Paradise Papers-related investigations is to promulgate a Presidential Ordinance aimed at amending two relevant sections of the income tax law that bar the opening of cases over five years old, said Dr Ikram ul Haq, an advocate at the Supreme Court of Pakistan. He said that section 111(4), section 122 and 122(5) have to be amended in order to open older cases.

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A cursory look at the Paradise Papers suggests that almost all the cases are more than five years old. Some may relate to commissions earned from the arms deals and deposited in the Swiss banks, said Dr Haq.

The International Consortium of Investigative Journalists (ICIJ) again released a treasure trove of more than 13.4 million documents on how the rich evaded taxes by manoeuvring offshore financial products. Among them are at least 193 Pakistani politicians, military officers and businessmen.

The records of Pakistanis were mostly found in Bermuda, British Virgin Islands, Cayman Islands, Malta and other jurisdictions with whom Pakistani authorities have not signed exchange of information treaties, according to FBR officials.

In a surprise move, Privatisation Minister Daniyal Aziz urged FBR to take action against those named in the leaks. He was speaking at a meeting of the National Assembly’s Standing Committee on Finance and Revenue. Aziz also asked the Securities and Exchange Commission of Pakistan (SECP) to share reports of the Pakistanis named in the leaks.

The standing committee endorsed Aziz’s views and asked FBR and SECP to share details with the committee.

“The FBR’s investigation into the Panama Papers was a bloody joke,” remarked PTI MNA Asad Umar.

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Aziz added there were about 450 Pakistanis named in the Panama papers. “What action has the FBR taken against them,” he questioned, adding that only one political family had been targeted and the Supreme Court did not even take action on Jamaat-e-Islami’s petition seeking action against all those named in the leaked documents.

Aziz said FBR should share the outcome of its Panama Papers investigation with the committee and also the status of the recovery of $200 billion claimed to be stashed in Swiss banks by Pakistanis.

The revenue board was sluggish in its response to the Panama Papers. The first tax notices were issued six months after the leaks, showing its hesitation at moving against wealthy and well-connected people.

In its judgment on the Panama Papers case against former PM Nawaz Sharif, the Supreme Court criticized FBR for those same ‘half-hearted’ efforts. The stance taken by FBR was that it had taken immediate cognisance of the matter and issued notices to people whose names had appeared in the Panama Papers case.

Initially, FBR had tasked its Directorate General of Intelligence and Investigation to probe the Panama Papers leaks. But later, it withdrew the Panama and Bahamas leaks cases from the intelligence directorate, which is stationed at its headquarters, and handed them over to field formations.

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The revenue board never shared the outcomes of its Panama Papers leaks investigations, although it had served tax notices on more than 300 people and entities. The notices had been served under Section 176 of the Income Tax Ordinance which empowers tax officials to seek information about any transaction.

However, at that time, AF Ferguson Senior Partner Shabbar Zaidi had claimed that the nature of the tax notice did not fall under Section 176 and the notices should have been served under Section 111 or Section 122(5) of the income tax law.

The Directorate General of Intelligence and Investigation does not have the powers to open wealth statements filed under Section 116 of the Income Tax Ordinance, said FBR officials.

Now FBR is again confused what to do, said the sources. Initially, it has assigned the responsibility to Inland Revenues Member Khawaja Tanveer Ahmad.

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The FBR’s strategy will again be that it can work within the law and the law does not allow opening more than five years old cases, according to an FBR official. It has not yet decided on whether tax notices will be served under section 176 or any other section.

Among those who have been named in the Paradise Papers are former PM Shaukat Aziz, former NICL chairman Ayaz Khan Niazi, hospitality magnate Sadruddin Hashwani, Nishat Group Chairman Mian Muhammad Mansha, Soneri Bank owner Nooruddin Feerasta, and Dawood Hercules Corporation Chairman Hussain Dawood.

In addition, Gen (retd) Mirza Aslam Baig, Lt Gen (retd) Zahid Ali Akbar, Admiral (retd) Mansoorul  Haq, Admiral (retd) Saeed Muhammad Khan, Air Chief Marshal (retd) Anwar Shamim, Brigadier (retd) Imtiaz Ahmad, Lt Gen (retd) Fazal Haq, Air Chief Marshal (retd) Abbas Khattak, and Maj Gen (retd) Shujat Ali Bukhari are among the senior military officials named in the documents.

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