Senate Standing Committee on Finance on Wednesday observed that it would be extremely difficult to prove wrongdoings in the presence of Protection of Economic Reform Act 1992 and the absence of required laws to seek official records from foreign countries known as tax havens. During the committee proceedings, State Bank of Pakistan (SBP) officials assured the committee to assist the proposed Judicial Commission to investigate the Panama Leaks. Senate Standing Committee on Finance held its meeting under the chairmanship of Senator Saleem Mandviwalla here at the Parliament House on Wednesday.
The SBP, SECP and one legal expert presented their opinions before the committee members on the issue of offshore companies and the Panama leaks. Mandviwalla and others were unanimous that nothing substantial would come out from the probe of Panama Leaks in the presence of some laws providing protection to those remitting their money outside Pakistan and in the absence of Avoidance of Double Taxation and mutual legal assistance treaties with countries known as tax havens.
The committee was informed that there is no such restriction under the Protection of Economic Reform Act 1992. The information took the members by surprise with Senator Mushahidullah saying "so there is nothing like money laundering from Pakistan". Senator Mohsin Leghari, however, asked: "So why are you holding that model Ayyan Ali for carrying $500,000?"
Officials of Securities and Exchange Commission of Pakistan (SECP) informed the committee that there were 192 companies in Pakistan in which offshore companies were making investments. "We have found that many companies were investing in offshore companies and it is a routine matter," they said. A legal expert/lawyer, Mehmood, who was invited on special invitation of the committee, said that Pakistan should become a signatory to the OECD convention having 60 members including some of them known as tax havens such as Switzerland as these would start sharing information about account holders in 2017 and beyond. India, he said, also became its signatory and would be able to draw details of bank account holders from September 2017. Nothing much could be done at the existing stage as Islamabad had signed Mutual Legal Assistance (MAL) treaties only with five countries: Tajikistan, Uzbekistan, Sri Lanka, China and Turkey.
He said the tracking this money trail from Pakistan was next to impossible. He highlighted that there were several places around the world that were known as 'treasure islands' because they were the hub of off-shore companies. Due to the absence of required laws to seek official records from foreign countries these places are known as tax havens, but he added that all off-shore businesses are not illegal. These places are mostly the British Virgin Islands which house more than 40 percent of world's off-shore companies, the expert said.
He added that around almost half of world trade and one-third of global wealth was in these off-shore companies. At the same time the Protection of Economic Reform Act 1992 was similar to the off-shore companies.
Deputy Governor SBP Saeed Ahmed Khan told the committee that the regulator would be willing to assist the Judicial Commission in its probe. The SBP official said the SBP could grant permission up to $5 million remitting outside Pakistan while any amount of $5 million and above would require the approval of Economic Co-ordination Committee (ECC), he added. It is expected that the FBR will brief the Senate Standing Committee on Finance on offshore companies and tax issues in a meeting to be held on Thursday (April 28).