The Federal Board of Revenue (FBR) has directed its offshore tax zones to start examining details of the Pakistanis named in the so-called Pandora papers amid the country’s dismal record of recovering wealth stashed abroad and evaded taxes despite multiple opportunities in the past.
Two tax amnesty schemes one by former Prime Minister Shahid Khaqan Abbasi and then by Prime Minister Imran Khan, incomplete information leaked in Panama and Paradise papers also became reasons for negligible recoveries in the past, according to FBR officials, who were associated with those investigations.
Sources said that the FBR Chairman Dr Mohammad Ashfaq directed the Automatic Exchange of Information (AEOI) zones –the formations responsible for overseas taxation matters –to start digging into the tax details of the people named in the latest leaks.
The information would then be compared with their annual income tax returns and wealth statements submitted with the FBR.
The initial assessment was that some of those whose names were made public on Sunday had declared their offshore movable and immovable assets, said an official based in the FBR headquarters. He added that the offshore information did not have companies’ names, which was also not the requirement under the offshore wealth statement format.
The International Consortium of Investigative Journalists (ICIJ) released another batch of data on Sunday that had released names of around 40 Pakistanis out of 700 that it said were found in these papers.
Despite being declared as its topmost priority, the government of Prime Minister Imran Khan could not take full advantage of the offshore information, available either because of splendid work of the ICIJ or under the Organization for Economic Cooperation and Development (OECD) agreements.
There is no full time Director General of International Taxes FBR for almost one and a half years, indicating the matter remained at low priority of the authorities.
Some of the people who have been named in the Pandora papers have already declared their offshore assets. Among them is president of the National Bank of Pakistan, Arif Usmani. “As part of submissions to the FBR as a returning Pakistani, I had declared the existence of “SASA Partners Inc. BVI” to all relevant authorities as per applicable laws”, Usmani told The Express Tribune.
Usmani said he remained abroad for over 26 years during which time the assets were acquired and no funds were ever transferred from Pakistan for these assets. The NBP president said that he declared all assets and this year paid taxes on international income. The SASA Partners Inc BVI is managed by Bank of Singapore Trustees and was created in 2017, he added.
There was another problem that many Pakistanis were non-residents for tax purposes, like the sister of a former military general, said the officials.
Finance Minister Shaukat Tarin also says that his offshore companies were in the knowledge of the central bank and were opened for selling stakes in his bank, the Silk Bank.
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The FBR has at least three options to proceed against these people, serve them tax notices for information under section 176, open their audit under section 177 or summon them and take statement on oath, according to an expert.
The governments of Prime Minister Imran Khan and his predecessor, Shahid Khaqan Abbasi, gave Rs61.4 billion in tax relief to just 191 billionaires, who had been caught owning offshore assets but were bailed out through two tax amnesty schemes.
In September 2018, the OECD had shared information about over 152,000 bank accounts owned by 57,450 Pakistani nationals, having $7.5 billion in bank deposits.
The FBR had focused on roughly 325 cases, and out of these, 191 persons availed the 2018 and 2019 tax amnesty schemes, Dr Mohammad Ashfaq, now the FBR chairman, had told the National Assembly Standing Committee on Finance in November 2019. At that time Ashfaq was DG of International Taxes.
These 191 people declared Rs94.2 billion worth of offshore assets by paying only Rs4.6 billion in taxes, These 191 people paid on average 4.9% of the value of assets in taxes, showed Ashfaq’s presentation.
The Income Tax Ordinance 2001 says that on a concealed asset, the FBR will charge a maximum income tax of 35% along with 100% penalty, bringing the total tax liability to 70%.
The total tax relief that these billionaires secured from the governments of Shahid Khaqan Abbasi and Imran Khan amounted to Rs61.4 billion at 70% tax liabilities. As many as 135 persons, named in the OECD database, availed the 2018 tax amnesty scheme of the PML-N and declared Rs62.4 billion in assets. They paid Rs2.9 billion in taxes, according to the 2019 presentation by the FBR.
However, their actual liabilities without the tax amnesty could have been Rs43.7 billion, getting a relief of Rs40.8 billion from the last government.
About 56 people, whose data was shared by the OECD, availed the PTI’s tax amnesty scheme and declared Rs31.8 billion worth of assets, showed the FBR presentation. They paid only Rs1.7 billion in taxes and got a relief of Rs20.6 billion.
Due to low recoveries, the Federal Tax Ombudsman (FTO) office had taken a suo moto notice and launched a probe to determine as to why the FBR’s three field offices were failing the prime minister and the nation.
The official record showed that the FBR headquarters forwarded nearly 1,580 cases worth Rs260 billion or $2 billion to three AEOI zones of Karachi, Lahore and Islamabad. The recoveries in about 1,150 cases were a mere Rs4.6 billion or $30 million as of last month.
PM Khan had promised to recover the $200 billion worth of looted money.
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