ISLAMABAD: The government is working on a package to regularise undeclared assets in offshore companies, tax officials told Dawn on Monday.

The package, to be announced in August, will be finalised and implemented by the Federal Board of Revenue, Securities and Exchange Commission of Pakistan (SECP) and State Bank of Pakistan.

“We have been asked to come up with a plan to regularise offshore and undeclared holdings of potential taxpayers,” a tax official said.

The Tax Reforms Commission had been developing the plan much before the Panama Papers leaks hit the headlines. The statutory period under the income tax law will only extend to five to six years back.

Nearly all Pakistan-linked companies that featured in the Panama Papers were incorporated long before that period.

Read: Offshore accounts: What they are and how they are used

“There is only one offshore company which may fall within the purview of the existing income tax law,” the official said.

Tax reforms body has proposed 15pc tax with no penalty to allow whitening of undeclared foreign assets

He said the government was hoping to get membership of the Organisation of Economic Cooperation and Development to enable tax officials to get information about investment of Pakistanis in foreign countries. The OECD has 34 member countries, including the US and Britain.

The tax official said an FBR delegation would leave for Germany on June 23 to negotiate with the OECD authorities. “We fulfil most of the conditions to become an OECD member.”

He said the proposed package included introduction of two laws for declaration of foreign assets and control of foreign exchange. One law will provide legal cover to the people who have not declared their overseas income and assets.

He said opposition parties would be taken on board before finalising the proposed scheme.

At present, there is no law which binds a person to declare his / her foreign assets.

The Tax Reforms Commission has proposed 15 per cent tax with no penalty to allow whitening of undeclared foreign assets.

Under the proposed law, assets of equivalent value in Pakistan would be forfeited if assets held outside the country were not declared in addition to other severe penalties.

The other law proposes an amendment to the Foreign Exchange Regulation Act (Fera) to get hold of black money kept abroad. Under a new section proposed to be inserted in Fera, equivalent of property in Pakistan can be seized by following a prescribed procedure if a person holds foreign exchange, foreign security or any immovable property outside the country.

The amendment was proposed to get hold of a person who is keeping assets in a tax haven in violation of Fera. The power of seizure under Fera is in addition to the penal action under the Income Tax Ordinance, 2001.

The FBR will take measures to arrest the outflow of untaxed money and assets from the country. The measures will include a close coordination with the State Bank of Pakistan and monitoring of outflow.

The SECP has also proposed certain steps to improve the reporting mechanism for the companies while declaring their foreign assets.

Published in Dawn, June 7th, 2016