The Federal Board of Revenue has identified 440 persons linked with different offshore companies and it is obtaining information and documentary evidence about the investment or income of the offshore companies of the Pakistani residents. Parliamentary Secretary for Finance Rana Muhammad Afzal Khan informed this to the National Assembly while responding to a question of PPP member Dr Nafisa Shah during the Question Hour.
The Security and Exchange Commission of Pakistan (SECP) has initiated investigation into the offshore companies and in this context, no direct investment has been made in offshore companies given in Panama Papers, registered in Pakistan relating to identified persons, Minister for Finance, Revenue and Economic Affairs Ishaq Dar also informed the house through a written reply of the same question.
"Prima facie, the investments mentioned in the Panama Papers were made by the persons in their individual capacity and same has not been routed through the company''s account," the minister said. Rana Afzal said the results obtained through the investigation will be analysed and compared with the FBR''s database and with the taxpayers'' record. "In case it is found that the person has filed the return and the information matches with the declared particulars of his income, no further action shall be taken," he said.
He also informed the house that in case no record of the person is found available with FBR, the person shall be issued notice u/s 114 of the Income Tax Ordinance, 2011 to file his income tax returns. In response thereto, if the person provides complete documentary evidence that the person is non-resident for tax purposes, no further action is taken under the income tax laws, he said.
The parliamentary secretary also said that in case, the return has been filed but the offshore investment or income, as the case may be, has not been declared by the person, the tax payer will be issued a show cause notice to explain the sources of investment and income derived there-from, including any other details/documentary evidence as are necessary.
"As a result of proceedings, if any evasion of tax is detected, the relevant provisions of the law are applied accordingly to retrieve the loss of state revenue," he said. Rana Afzal said that offshore companies may be legitimate and economically beneficial, or in certain cases harmful and even criminal. The basic principle of taxation around offshore companies is to ascertain whether these companies are formed for benign business purpose or for illegal and tax evasion purposes, he said.
The parliamentary secretary said that if any Pakistani national, being resident for tax purpose, has shifted his after-tax money from Pakistan and formed an offshore company in foreign country, including tax haven such as Panama, for benign and legal business purpose, there is no illegality in that case.
"If any Pakistani national, being resident for tax purpose, has shifted his hidden or untaxed money from Pakistan through covert or illegal channels and formed an offshore company for the purposes of tax avoidance or money laundering, then it would certainly be treated as an illegal action," he said.
A Pakistan individual is treated as resident for tax purpose, if he is present in Pakistan for a period of or period amounting in aggregate to, 183 days or more in the tax year, he said. The finance minister informed the house that certain companies have entered into transactions with companies registered in foreign jurisdictions, which is not prohibited in terms of Companies Ordinance, 1984.
"The SECP has initiated correspondence with such companies. The instances where non-compliance would be observed, necessary legal proceedings shall be initiated in accordance with relevant provision of the law," he said. The minister said that in order to handle such matters on immediate basis special provisions pertaining to maintenance of record of foreign investment in shape of Companies'' Global Register of Beneficial Ownership have been introduced in Draft Companies Bill, 2016.
Further enhanced disclosures have been proposed in the financial statements in the proposed Companies Bill, 2016 in respect of investments in foreign companies, he said.
To another question, Minister for Planning Ahsan Iqbal told the House that the federal government has released Rs 2.7 billion to the Sindh government for Karachi Water Supply Scheme (K-IV).
He said that the government has allocated Rs 1, 000 million for the current fiscal year and the project is expected to be completed by 2018. Minister for Interior Chaudhry Nisar Ali informed the house that National Database and Registration Authority (NADRA) blocked as many as 237,000 National Identity Cards (NICs) and cancelled 29,000 passports over the last three years. However, out of these, 40,124 NICs were cleared in 2015 and 34,130 in 2016, the minister added.
He said NADRA had taken many initiatives for facilitation of general public and started NICs re-verification drive in which so far over 35 million NICs had been verified. BISP has successfully disbursed Unconditional Cash Transfer of Rs 412 billion in 5.3 million families across the country since inception whereas Rs 250 billion has been disbursed during last three years, Finance Minister Ishaq Dar informed the house.
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