FBR drags feet over action on untaxed offshore investment
Credit: The News International
KARACHI: The Federal Board of Revenue (FBR) is dragging its feet over actions against Pakistanis who couldn’t declare offshore investments to evade taxes despite that the tax authority has stumbled upon critical financial data under an international treaty, people familiar with the matter said on Tuesday.
Insiders said the apex tax authority could not initiate scrutiny of data to detect offshore tax evasion on money generated in Pakistan.
The FBR received the first batch of data about locals’ offshore investments under an international exchange of information agreement in September, but the details about the foreign transactions are still lying unattended in the central databank of the FBR due to various administrative hurdles.
The FBR, however, said it started conducting scrutiny from October 1 in order to detect tax evasion and undeclared money of Pakistanis living in the member countries of Organization for Economic Cooperation and Development (OECD).
In September 2016, Pakistan signed an agreement of multilateral convention on mutual administrative in tax matters with the OECD to become the 104th jurisdiction for taking action against offshore tax evasion.
The agreement gives the country an access to information of its citizens having undeclared income and making financial transactions in OECD member countries.
In April, the government announced tax amnesty scheme to give residents one-off tax benefits for repatriating undeclared local liquid assets with a five percent penalty, undeclared foreign liquid assets with a two percent penalty (if repatriated, or a five percent penalty if remaining abroad or in foreign currencies), and undeclared fixed assets – whether held locally or abroad – with a three percent penalty. The amnesty expired in July.
The FBR has so far received information from UK, UAE, Switzerland, Saudi Arabia, Qatar, Panama, China, British Virgin Islands and some other countries.
The FBR set up six automatic exchange of information (AEOI) zones and gave additional charge to senior officials.
Inland Revenue has been authorised to receive and send details under the exchange of information agreement.
The sources said the zones have commissioners, but they lack workforce.
A FBR official said the FBR received information of Pakistanis who made transactions through banks, stock market, fund managers and insurance companies.
The official said the information has been categorised and individuals having huge bank deposits in foreign banks would separately be examined.
The official said the FBR got details of many Pakistanis with offshore accounts. Details of individuals who invested in capital markets through fund managers were also received, the official added. In July, the country received data of numerous Pakistanis who own properties in the UK.
The FBR disseminated the data to relevant large taxpayers units (LTUs) and regional tax offices (RTOs) for further proceedings. An official at LTU Karachi said notices were sent to the individuals with the UK data.