ISLAMABAD: More than a year since issuing notices to the Pakistanis mentioned in the Panama Papers, the country’s tax officials are losing hope of obtaining information about the money used to buy assets abroad.
In September 2016, the intelligence directorate of the Federal Board of Revenue (FBR) issued 344 notices to owners of the offshore companies mentioned in the Panama Papers but the tax officials received a very poor response.
The poor response has discouraged the tax officials so much that they have not opted to issue any notices to those named in the recently revealed Paradise Papers. The officials feel that such revelations make good headlines but hardly provide sufficient grounds for the authorities to tax people.
Notices sent over one year ago get poor response
A separate office was established at the FBR headquarters to collect information regarding the notices sent to owners of offshore companies.
Official data show that show-cause notices mentioning penalties have been issued only to 10 persons in the one year since emergence of the Panama Papers. This shows that owing to several reasons the compliance is negligible.
In the first show-cause notice, the penalty mentioned stood at Rs25,000 as per the income tax ordinance.
Data available with Dawn show that only 72 persons confirmed their ownership of offshore companies. However, they did not admit to their assets.
Twelve individuals were reported to be dead in the responses received from their widows. As many as 55 persons denied that they had links with the offshore companies.
Eighty-four notices could not be delivered on the addresses mentioned in the Panama Papers. However, the tax department is in correspondence with 57 individuals.
Fifty-four individuals replied that they did not fall under the jurisdiction of the Pakistani tax authorities because they were non-resident Pakistanis.
An official said the Panama Papers experience had shown that leaks only helped in identifying the names of certain people. The challenge before the FBR was to obtain details of the assets accumulated by such people, which were not shared in documents like the Panama Papers.
During investigations it was found that an offshore company was established in the name of a watchman. He was shocked to know that he owned an offshore company, the official said.
“We can’t get anything out of these notices,” the official said, adding that the only option before the department was to get information from the Organisation for Economic Cooperation and Development’s multilateral mechanism regarding the exchange of information on assets.
Last year the FBR sent letters to nine tax havens — the British Virgin Islands, Bahamas, Panama, Seychelles, Niue, Samoa, Mauritius, Anguilla and Jersey — asking them to share details of the assets owned by the people named in the leaks. But it did not get any positive response.
A senior official said nothing would come out of such leaks until Pakistan entered into treaties about avoidance of double taxation.
Published in Dawn, November 19th, 2017