ISLAMABAD: The country’s tax officials received a poor response to the notices they had sent to the owners of offshore companies, as revealed in the Panama Papers and Bahamas leaks, according to sources.

The Federal Board of Revenue (FBR) had sent notices to 444 individuals, who were said to own companies in nine tax havens in the world — the British Virgin Islands (271), Bahamas (25), Panama (84), Seychelles (44), Niue (10), Samoa (four), Mauritius (three), Anguilla (two) and Jersey (one).

Of these tax havens, three territories are in direct control of the United Kingdom — the British Virgin Islands, Anguilla and Jersey. Out of the 444 individuals, 274 were said to own companies in these three tax havens.

In a damning report released on Dec 12, international development agency Oxfam indentified two more tax havens — the Cayman Islands and Bermuda which fall under the control of UK.

Examine: Offshore tax havens

The Oxfam report listed the world’s worst tax havens as Bermuda, the Cayman Islands, the Netherlands, Switzerland, Singapore, Ireland, Luxem­bourg, Curacao, Hong Kong, Cyprus, Bahamas, Jersey, Barbados, Mauritius and the British Virgin Islands.

According to the report, these tax havens facilitate extensive corporate tax avoidance through profit-shifting, aggressive tax planning structures and so-called sweetheart deals.

“We have cases of Pakistani offshore companies only in five out of the 15 tax havens identified in the report,” an official said.

However, the report indicated that a number of Pakistanis might be owning companies in the Netherlands, Ireland, Singapore, Luxem­bourg, Hong Kong and Switzerland, he added.

The notices

The FBR issued a total of 336 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 of Inland Revenue received responses from 57 individuals, who confirmed owning offshore companies.

Twenty-three individuals replied that they did not fall under the jurisdiction of Pakis­tani authorities because they were non-resident Pakistanis. Interestingly, 39 of the individuals claimed that they had no links with the offshore companies mentioned in the Panama Papers.

According to the officials, 11 individuals were reported to be dead in the responses received from their widows. “In some cases, the women were shocked to know that their husbands owned offshore companies,” the official said.

In 31 of the cases the process of investigation was adjourned due to various reasons and the notices remained un-served in 37 cases.

Fourteen of the individuals admitted that they owned companies but claimed that they only existed on paper.

Moreover, 60 notices were sent to the tax intelligence directorate to serve on individuals across the country. In 10 of the cases, the individuals concerned opted to contest the notices issued to them, while in eight cases legal issues were raised.

In the wake of Panama Papers leaks, show-cause letters carrying penalties were issued to only 60 individuals. Under the first show-cause notice, the penalty amount stood at Rs25,000, as per the income tax ordinance.

The Bahamas leaks named 150 Pakistanis. However, the whereabouts and identities were established only in 108 cases. So notices were sent to 108 individuals under section 176 of the income tax ordinance.

The FBR’s tax intelligence department received confirmation from 11 individuals that they did own offshore companies. Five of the individuals claimed that they had no links with the offshore companies mentioned, five sought adjournment, and in two cases the notices remained undelivered.

In view of the poor response, FBR officials have sent reminders to 69 individuals.

Published in Dawn December 26th, 2016