Tax laws shield most Panama Papers’ names from legal action

The Pakistani tax laws don’t allow the authorities to proceed against most, if not all, of those named in the Panama Papers, the Federal Board of Revenue (FBR) sources claim.

They said the limitation clauses of the income tax laws bar the tax man from going beyond the last five years. “We have not yet found any actionable case among those named in the Panama Papers,” a source said, adding that the law does not permit to open cases beyond the limit set in the law.

Tax declarations of income tax filers are time barred and could not be opened beyond last five years. The law also restricts the tax man from probing the investment, wealth or income of a non-filer beyond ten years. Earlier for even non-filers, the time barred period was five years.

The FBR sources said that so far all those offshore companies looked into are found time barred and thus are not actionable under the law.

Recently in response to a question from PPP’s Dr Nafisa Shah, the National Assembly was told by the government that the FBR has identified 440 persons linked with different offshore companies and it is obtaining information and documentary evidence about the investment or income of the offshore companies of the Pakistani residents.

Parliamentary secretary Rana Afzal had told the NA that in case it is found that the person has filed the return and the information matches with the declared particulars of his income, no further action shall be taken. He informed the house that in case no record of the person is found available with FBR, the person shall be issued notice u/s 114 of the Income Tax Ordinance, 2011 to file his income tax returns.

The parliamentary secretary also said that in case, the return has been filed but the offshore investment or income, as the case may be, has not been declared by the person, the tax payer will be issued a show cause notice to explain the sources of investment and income derived there-from, including any other details/documentary evidence as are necessary.

The FBR sources, however, said that the notices could be issued to only those filers or non-filers who would have opened these offshore companies during the last five years, in case of filers, and ten-years in case of non-filers.

Regarding the Security and Exchange Commission of Pakistan (SECP) investigation into the offshore companies, the NA was recently told, “Prima facie, the investments mentioned in the Panama Papers were made by the persons in their individual capacity and same has not been routed through the company’s account.”

A few months back, the Minister for Finance Ishaq Dar was reported to have directed the FBR, SBP and SECP to initiate a probe into the Panama Papers with the directives to complete this exercise on a priority basis.

The FBR was told by the finance minister to verify whether all those persons having resident status as defined under the Income Tax Ordinance 2001, whose interests in offshore companies had been made public in the Panama Leaks, had fully declared the said interests in their annual tax returns available with the FBR. It was also directed that in case any of the aforementioned persons was not a filer, proceedings in accordance with the law may be initiated immediately.