ISLAMABAD: The joint investigation team (JIT) being formed to probe the money trail of the assets owned by Prime Minister Nawaz Sharif and his family will not be able to obtain information from other countries through the multilateral Convention on Mutual Administrative Assistance in Tax Matters until September 2018, reports Dawn.
Pakistan formally became a part of the 109-member Organisation of Economic Cooperation and Development (OECD) — the global regime that allows for information sharing regarding taxation and financial matters — in April 2017 and will automatically begin to exchange and receive records of assets from next year.
Under the multilateral convention, Pakistan will receive information regarding Pakistanis holding funds abroad and will begin to exchange similar information with other countries whose citizens hold bank accounts in Pakistan from July 2018. Details of non-residents will span the period between July 2017 and June 2018, as well as for those bank accounts opened before this period.
On a reciprocal basis, Pakistan will also receive information regarding Pakistani holdings in 109 countries for the same period.
This process begins later for Pakistan as it was one of the last countries to join the OECD.
In its decision on Thursday, the Supreme Court ordered the JIT to complete its probe within 60 days and framed 13 questions, which will have to be investigated and answered.
When offshore companies of more than 444 individuals, including the PM’s sons, were revealed in the Panama Papers and Bahamas leaks, the Federal Board of Revenue (FBR) formally initiated an investigation into the leaks in September 2016.
A tax official told Dawn the JIT could only rely on alternative local and personal sources abroad to probe the case, if needed and required. The JIT would mainly be relying on information as provided by the prime minister and his sons, he said.
But Pakistan has no bilateral treaty on avoidance of double taxation with nine other tax havens, identified in the leaks, which could bind them to share information with Pakistan.
According to details available with FBR, the 444 individuals named in the leaks are said to own companies in the following nine tax havens: the British Virgin Islands (271), Bahamas (25), Panama (84), Seychelles (44), Niue (10), Samoa (four), Mauritius (three), Anguilla (two) and Jersey (one).
Two of these nine tax havens — Bahamas and Nieu — are not signatories of the OECD multilateral convention, while the seven others directly or indirectly fall under the purview of the convention.
Of these, three territories are in direct control of the United Kingdom — the British Virgin Islands, Anguilla and Jersey. Of the 444 individuals, 274 are said to own companies in these three tax havens alone. In March 2014, the UK extended the scope of the OECD convention to these territories.
The companies associated with the family of the prime minister were mostly based in the British Virgin Islands.
Other tax havens, such as Panama, will enforce the OECD convention from July 1, 2017.
To get detailed information about the offshore companies, the FBR approached nine tax havens through the Ministry of Foreign Affairs.
An official confirmed to Dawn that letters were dispatched to the governments of all nine havens on October 18, 2016, seeking the necessary information and documentary evidence from their revenue authorities.
On Feb 17, 2017, the FBR sent a reminder to the foreign ministry to follow up on the issue. “We have received one reply from Samoa, which declined to share information with Pakistan,” a tax official said, adding that their plea was that Islamabad had no bilateral double taxation treaty with Samoa.
Since then, the official said, FBR had initiated the process to solemnise a bilateral treaty on avoidance of double taxation with Samoa. “We are also considering bilateral treaties with all other tax havens,” the official said.
But these treaties will be of no use to the JIT, since they will become effective after its stipulated time period would have expired.
According to the FBR’s intelligence directorate, the board issued a total of 344 notices to individuals identified as owners of offshore companies in the Panama Papers. The notices sought information regarding ownership of companies/entities and details about their financial and tax matters.
The FBR’s Directorate of Intelligence and Investigation (Inland Revenue) received responses from 250 individuals and a breakdown shows that 72 individuals were confirmed as owners of offshore companies.
According to officials, 12 of them were reported as being dead in the responses received from their widows. Interestingly, 55 of the individuals claimed that they had no links with the offshore companies mentioned in the Panama Papers.
Thirty-nine individuals replied that they did not fall under the jurisdiction of Pakistani authorities because they were non-resident Pakistanis. In 72 cases, the process of investigation was adjourned for various reasons and in 84 cases, notices could not be served as the individuals remained untraceble.
Around 155 individuals in the Panama Papers were identified as directors of 600 companies in Pakistan. “Most of these individuals have not filed any income tax returns,” a revenue official said.