ISLAMABAD: After waiting over four months, the Federal Board of Revenue (FBR) chose Saturday — a day when both Imran Khan and Dr Tahirul Qadri were holding anti-government protests in two of Punjab’s major cities — to disclose that it had started issuing notices to Pakistani residents whose investments in offshore companies were revealed by the Panama Papers leaks.

“The Directorate General of Intelligence & Investi­gation for Inland Revenue has issued notices to persons whose names have been mentioned in media reports [regarding the Panama Papers] to obtain their version regarding the reports so as to authenticate them,” FBR spokesperson Dr Mohammad Iqbal told Dawn on Saturday.

Each person issued notices would have 15 days to answer the questions posed by the tax department, the official said.

It is telling that FBR would choose to reveal information on such a burning issue on Saturday, which is not ordinarily a working day. But even though this was not a formal announcement, the fact that the revelation coincided with two major anti-government rallies — which incidentally were also demanding accountability on the Panama Papers leaks — raised several eyebrows.

The spokesperson said it would be difficult to give an exact number of the notices issued so far. The directorate is working to collect the actual addresses of the people mentioned in the Panama Papers so they could be sent notices, he said, adding that this process had begun a few days ago on Thursday.

The spokesperson added that there were several people among the 350 Pakistanis named in the Panama Papers who are non-residents and would not be issued notices.

Section 176 of the Income Tax Ordinance 2001 empowers tax officials to issue notices to any person whenever there is any information regarding tax-evasion or concealment of income, to ascertain whether such claims are true.

But in the case of the Panama papers, the FBR had been reluctant to use this power. Under tax laws, the FBR is supposed to ascertain whether offshore companies owned by Pakistanis have been formed legally or for the illegal purpose of tax evasion.

A senior tax official said that if a Pakistani resident had shifted money from the country after paying tax on it and formed an offshore company in a foreign country for a legal business, it would not be considered an illegal act.

On the contrary, if a Pakistani resident had shifted hidden or untaxed money from the country through covert or illegal channels and formed an offshore company to avoid tax or launder ill-gotten money, it would be deemed an illegal act.

The information collected from individuals through the first notice will help the FBR proceed to the second stage, which is clearly mentioned under in the law.

In case a person has filed an income tax return and the information received matches the declared particulars, 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 returns, he said.

It is the responsibility of the Regional Tax Offices or Large Taxpayer Units to issue notices to people whose names have been revealed in the Panama papers. However, this power was not exercised up until now, for reasons best known only to top officials.

The FBR spokesperson said there was no harm in allowing the Directorate General Of Intelligence & Investigation for Inland Revenue to issue these notices. “We want to handle the issue in one place,” he said.

A tax official said that one major hurdle in the investigation of the issue was the time limit on such matters. “We can’t investigate [events that transpired] more than six years ago,” the tax official said, adding that there were hardly any companies in the leaked documents that was formed in the past five years.

The only solution, according to the official, is the constitution of a commission that can investigate beyond the statutory limitation period.

An FBR official told Dawn that Pakistan had no treaty with Panama on the avoidance of tax evasion. Therefore, Pakistan could not get any concrete evidence about the individuals whose name had been mentioned in the papers.

He claimed Pakistan’s income tax laws were designed “by the elite” and had many loopholes that allowed people to get away with tax evasion.

He also mentioned that since both the prime minister’s sons are non-residents, local tax laws do not apply to them.

Tax expert Dr Ikramul Haq told Dawn that the FBR was not going to get anything from this exercise. Both PM Sharif’s sons, he said, were not obliged to reply to the FBR notices. “This is just a paperwork,” he observed.

Dr Ikram said that a real investigation should be based on the confession of the prime minister regarding the purchase of property abroad and its money trail, i.e. how was the money transferred abroad in the first place.

“Investigations, if any, should probe whether there was any violation of the Foreign Exchange Act 1947,” he commented.

Published in Dawn, September 4th, 2016