ISLAMABAD: Despite the lapse of over four months, the country’s tax machinery is still reluctant to obtain information about Pakistani residents’ investment in offshore companies revealed in the Panama Papers or income obtained from such companies.

“No formal step has been taken so far under the tax laws regarding Pakistani residents who hold offshore companies as revealed by the Panama Papers,” a tax official told Dawn.

“Even no tax official in the Federal Board of Revenue is willing to talk on record whether there is any plan to investigate the matter to detect tax evasion or otherwise. I have not seen any development in this regard,” he said.

FBR spokesperson Dr Mohammad Iqbal could not be contacted for comments despite efforts.

Under the tax laws, the FBR is supposed to ascertain whether offshore companies owned by Pakistanis have been formed for legal business or for illegal purpose of tax evasion.

Like the FBR, the Securities and Exchange Commission of Pakistan (SECP), a corporate regulator, has also launched no formal investigation into the matter.

“We have not initiated any formal investigation into the matter,” SECP spokesperson Bushra Aslam told Dawn.

The FBR and the SECP administratively fall under the purview of the finance ministry, headed by Ishaq Dar, a close confidant of Prime Minister Nawaz Sharif.

According to FBR explanations submitted in the form of a document to the National Assembly, if a Pakistani resident has shifted his after-tax money from the country and formed an offshore company in a foreign country for a legal business, it is not an illegal act.

Contrary to this, if a Pakistani resident has shifted his hidden or untaxed money from the country through covert or illegal channels and formed an offshore company for avoiding tax or money laundering, it is an illegal act.

The FBR is yet to initiate an investigation to differentiate between offshore companies formed by Pakistanis after paying tax and without paying tax.

In the National Assembly’s Aug 10 session, PPP member Dr Nafisa Shah had sought details from Finance Minister Dar about steps taken by the government to investigate offshore companies of Pakistanis whose names had been revealed in the Panama Papers.

In a written reply, Mr Dar claimed that the FBR was obtaining information, but he gave no details as to when the investigation was launched and when it would be completed.

The minister said any information, once received, would be cross-matched with the FBR database and the taxpayer’s record.

“In case it is found that the person has filed income tax return and the information matches the declared particulars of his/her income, no further action will be taken. But if no record is found in the FBR database, the person will be issued a notice under Section 114 of the Income Tax Ordinance 2001 to file his/her income tax return,” he said.

FBR response to Imran Khan’s allegations

The FBR said on Wednesday the tax machinery could not share taxpayers’ data with unauthorised persons.

An official statement, issued in response to allegations levelled by Pakistan Tehreek-i-Insaf chairman Imran Khan at a recent rally against tax officials, said that under Section 216 of the Income Tax Ordinance, record of taxpayers was a sacred trust.

Mr Khan had alleged that two senior officials of the FBR — Member Inland Revenue Operations Dr Mohammad Irshad and Chief Income Tax Amjad Zubair Tiwana — had been assigned the task to manipulate the tax record of Prime Minister Nawaz Sharif and his family.

The PML-N government was trying to manipulate the tax record in the wake of Panama Papers leaks which had revealed offshore companies owned by the prime minister’s children, he alleged.

The FBR said that it had fool-proof automated processes for record maintenance and updating. “No individual can alter, edit or modify the record except as provided under the law and standard operating procedures.”

It said the record was stored in a secure database and any access to it was automatically recorded by the system. Thus there is no question of tampering with the record in any way.

“The allegations are false and baseless and constitute an attempt to bring two competent, honest and senior FBR officers enjoying impeccable reputation of integrity and professional competence to disrepute and can demoralise and discourage employees of the FBR who have recently made an unprecedented accomplishment of surpassing a massive collection target of Rs3,104 billion during financial year 2015-16,” the statement said.

“It will be in the best national interest if such allegations are retracted and the FBR is allowed to continue performing its functions and duties in a non-partisan manner.”

The FBR said that while issuing such statements political leaders should consider the adverse impact such statements had on individuals’ reputation in society and the morale of national institutions.

Published in Dawn, August 18th, 2016