ISLAMABAD: In a desperate effort to reinvigorate the lackluster offshore tax amnesty scheme, the Federal Board of Revenue (FBR) claimed on Monday it will proceed against individuals who own immovable properties in the United Kingdom but did not disclose them yet.
“The FBR obtains information in respect of immovable properties owned by Pakistanis in the United Kingdom with the assistance of OECD (Organization for Economic Cooperation and Development) and UK Tax Authorities,” a brief statement issued by the FBR said.
It stated that the information was being analyzed “for taking further action”.
Surprisingly, the OECD exchange of information is scheduled to begin from September this year and it will not include details of immovable properties.
This information would largely be related to details of the bank accounts, according to FBR officials.
However, a senior FBR officer said that it was “spontaneous exchange of information, under a pilot project being run by FBR and the UK’s tax authority”.
He contended that the UK authorities had shared information about only those individuals who are not UK residents.
According to him, the UK has shared information about hundreds of Pakistanis who own properties there.
The information also includes details of income of some individuals, mostly dating back to five years ago, according to a number of FBR officials.
Information from foreign jurisdictions can be exchanged on request and spontaneous exchange and automatic exchange are done through a bilateral or multilateral agreement.
Tax officials said that this information will be processed by field formations and the jurisdiction is being decided.
FBR’s Member Inland Revenue Policy Dr Mohammad Iqbal will supervise the whole exercise.
This FBR claim comes at a time when the bureau’s offshore tax amnesty scheme received a poor response.
According to the federal Ministry of Finance, Pakistani citizens have declared foreign assets worth Rs577 billion or just $4.8 billion and repatriated a meager sum of $40 million.
Tax authorities had pegged their hopes on Pakistani citizens to declare a significant chunk of the estimated $150 billion moveable and immovable assets under the amnesty scheme.
The government has already extended the scheme by a month (till July 31) in view of the lukewarm response. The amnesty scheme was originally scheduled to end on June 30.
On Monday, FBR’s Member Facilitation and Taxpayers Education, Lubna Farrukh Mirza ruled out the possibility of any further extension in the deadline of tax amnesty.
Advising the people to use this opportunity to declare their undisclosed assets before the end of the amnesty scheme, she said that after the amnesty expired, they could face penalty and prosecution in addition to tax on their undeclared assets and income.
The government offered Pakistani citizens to declare their liquid foreign assets at 5% rate and immovable assets by paying just 3% tax. Individuals who actually brought their assets back to the country and invested in government amnesty bonds, the tax rate is just 2%.
Another senior FBR official insisted that the information received from the UK was “actionable”, which will help the tax machinery to proceed against individuals who opted not to disclose these assets under the amnesty scheme.
He said that unlike Panama Papers, the information shared by UK authorities was latest and more specific.
The G20 nations have developed a 15-point action plan to curb tax avoidance in which point 13 gives detailed guidelines for transfer pricing documentation and also provides a standardized reporting format called Country-by-Country Reporting (CBCR).
Pakistan’s CBCR Peer Review was completed in February this year. The review covered domestic legal and administrative framework, certain aspects of the exchange of information framework as well as certain aspects of the confidentiality and appropriate use of these reports.
Pakistan is part to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
According to the CBCR Peer Review, as of January this year, Pakistan had not activated bilateral relationships under the CbC Multilateral Competent Authorities Agreement (MCAA).
The OECD had recommended that Pakistan should take steps to enable exchanges in respect of the first fiscal year and have Qualifying Competent Authority agreements in effect with jurisdictions of the Inclusive Framework that met the confidentiality, appropriate use and consistency conditions.
The FBR’s spokesman maintained that Pakistan had subsequently fulfilled all legal and regulatory requirements.
On the issue of appropriate use of information, the CbC Reporting Peer Review report noted: “Pakistan does not yet have measures in place relating to appropriate use”.
But the FBR spokesman insisted that this requirement had also been met.