AFTER an unsuccessful bid to broaden the tax net at home, the FBR now plans to explore the oases in the Gulf economies in the hope of discovering rich Pakistanis hiding their ill-gotten money there. The FBR expects the effort to realise tax revenues of Rs300-400bn to help it bridge the growing collection gap which has already widened to Rs39bn in the present fiscal. Stories about how Pakistan’s wealthy businessmen, generals, bureaucrats, politicians and others have invested heavily in the Gulf property market are common. A proportion of the investments is alleged to comprise black money laundered out of the country. The estimates of these investments vary widely. It’s also unclear how much of the amount is dirty money. Yet the stories about these riches have been going on for long and there has been a craving to discover the treasure. The FBR is now seeking to do just that — a huge challenge given that it has no idea of how much money has illegally left the country.

Officials say the FBR has begun gathering data on Pakistani investments in the Gulf. Through this exercise, it wants to determine the amount of the laundered money and recover tax from the evaders. It plans to invoke the bilateral treaty between Pakistan and the UAE to avoid double taxation, as well as other international laws prohibiting a country from becoming a safe haven for drugs, corruption and dirty money. But it is not that easy to use international laws to make the Gulf governments cooperate with Pakistan’s tax authorities. For the former, there is the risk of reduction in foreign investments worth billions of dollars. Islamabad also doesn’t have the kind of leverage which, say, the Western governments have with the Gulf rulers. These are impediments the FBR must overcome to implement its plan to detect and tax the laundered money. It must at the same time plug the loopholes which help the unscrupulous avoid taxes and take illegal money out of the country.