ISLAMABAD: The country’s tax machinery is ready to issue notices to all Pakistani residents whose investments in offshore companies have been revealed in the Paradise Papers.

“We held an informal meeting today on the issue,” a source in the Federal Board of Revenue (FBR) told Dawn on Monday.

As it did with the Panama Papers investigation, the FBR will allow its Intelligence & Investigation Wing to issue notices to all those who were identified in the fresh leaks and named in media reports. “We will adopt the same pattern used in the wake of the Panama Papers,” the source said.

Each person issued a notice will have 15 days to answer the questions posed by tax authorities.

Read: Only 39pc of tax evasion cases pursued under PML-N

While media reports claimed that 135 Pakistanis, including former prime minister Shaukat Aziz, were named in the fresh leaks, only five to six names were disclosed by the International Consortium of Investigative Journalists (ICIJ), the source said.

Süddeutsche Zeitung journalist says won’t release original documents to any state authority

Haroon Akhtar Khan, who is special assistant to the prime minister on revenue, told Dawn that while it would be easy to get details of known figures, it would take time to collect information about common citizens who were named in the leaks.

The only way to get the required details was the Organisation for Economic Cooperation and Development’s (OECD) multilateral mechanism regarding the exchange of information on asset details.

He said that media reports or leaks could only help identify the names of people who had invested in tax havens, but the challenge for the tax authority was to obtain details of the assets accumulated by those individuals, which were not shared in such leaks.

Mr Khan said the FBR had already written to nine tax havens to get details of the assets of individuals who were named in the Panama Papers. “We have not received any reply from these countries,” he said.

According to a senior tax official, the current income tax law has a very relaxed definition for ‘non-resident’, and that under the existing laws, the FBR cannot even send a notice to former prime minister Shaukat Aziz.

Under the law, the tax machinery will first have to ascertain whether the offshore companies owned by Pakistanis were constituted legally or whether they were meant for the illegal purpose of tax evasion.

If a Pakistani resident has shifted money from the country after paying taxes on it and formed an offshore company for legal business purposes, it cannot be considered an illegal act.

However, if a Pakistani resident has 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 wealth, this would be deemed an illegal act.

The information gathered through the first notice sent to the named individuals will help the FBR proceed to the second stage.

But a tax official said the major hurdle in the investigation of such cases was the statutory time limit on such matters; the FBR can’t investigate cases more than six years old.

Pakistan also has no treaty with the nine tax havens on the avoidance of tax evasion, therefore it will be unable to get any concrete evidence about the individuals whose names had been mentioned in the leaks.

FBR Spokesperson Dr Mohammad Iqbal told Dawn that the board was waiting for the names of the people who were identified in the Paradise Papers, adding that the tax machinery would follow the same procedure adopted in the wake of the Panama Papers leaks.

SZ won’t release originals

Meanwhile, the investigative journalists who uncovered both the Panama and Paradise Papers say they will not be sharing the original documents or data with public or legal authorities, nor would it be publishing a list of all those named in the latest leak, in a bid to protect their sources.

Frederik Obermaier of Süddeutsche Zeitung (SZ) told Dawn that neither his organisation, nor the ICIJ had handed over documents to any country’s authorities. “SZ isn’t an accessory to state prosecutors or tax officials and working together with the state would violate journalistic principles. The state has plenty of means at its disposal to investigate problems revealed here.”

“SZ will not publish all of the names that can be found in the Paradise Papers,” he said, explaining that for many of the companies and private individuals listed, there is no obvious public interest in revealing their names.

An obvious public interest can be present if there is suspicion that a public figure has violated the law, such as through tax evasion, he said, adding that ICIJ would add the information from the Paradise Papers to its existing database of Offshore Leaks.

He also pointed out that the two troves of documents – Panama and Paradise Papers – differed in “both source and content”.

“In contrast to the Panama Papers, the present documents don’t just contain information pertaining to politicians, athletes and the super-rich, but also to numerous multinational corporations that use the offshore system. Among Appleby’s clients are companies like Nike, Apple, Facebook, Walmart, Allianz, Siemens, McDonald’s and Yahoo.”

Mr Obermaier did, however, point out that much of the activity documented in the data was legal. “Private persons who set up an offshore company, report it to the authorities and tax its profits don’t usually run into problems.”

“But just because something is legal doesn’t mean it is legitimate or uncontroversial,” he said, explaining how the national budgets of almost every country in the world lose out on billions each year through legal tax avoidance.

Published in Dawn, November 7th, 2017