FBR, in fact, moved a detailed summary to this effect during the previous regime, but the then Finance Minister Dr Abdul Hafeez Sheikh never approved it. It is now pending with Ishaq Dar. A senior tax official of FBR recently confided with us that "the entire parliament readily gives approval for oppressive taxes on the poor, extends unprecedented tax benefits to the militro-judicial-civil complex but blocks any measure aimed at exposing billions stashed abroad by tax evaders and looters of national wealth".
The Senate during Zardari's rule never passed even a resolution for taxing billions lying abroad. However, Senate's Standing Committee on Finance, in its non-binding recommendations sent to the National Assembly on 21st June 2013 regarding Finance Bill 2013, specifically suggested exchange of information with Swiss government to unearth untaxed accounts of Pakistanis. On these funds tax is not paid by Pakistani residents, though under the law they are bound to declare both Pakistan and foreign source income (total world income) and then claim exemption or credit on the doubly-taxed income, if available under the relevant Avoidance of Double Taxation Agreement [DTA].
Dar is jubilant over getting bailout from the IMF and loans from others - though it should have been an occasion for soul-searching. He is keen to follow good advice of donors to levy taxes, even if incidence falls on the poor. But he has shown no interest at all in punishing wealthy tax evaders with the same vigour as his friends in Washington are doing. We should remind him that United States and Switzerland have recently struck a deal allowing some Swiss banks to pay fines to avoid or defer prosecution over tax evasion by their US customers. The deal will apply to 100 second-tier Swiss banks, which would have to disclose some previously hidden information and face penalties of up to 50 percent of assets they managed on behalf of wealthy Americans. However, it would not cover banks already under US criminal investigation, which include some of Switzerland's banks.
According to a report by Patrick Temple West and Katharina Bart, "the deal is a step forward in a long-running US drive to pierce the shroud of Swiss bank secrecy, though analysts said it was too early to say how much the Swiss banks would have to pay or how much extra revenue would flow to the United States." Swiss privacy laws have helped to make the Alpine country the world's biggest offshore financial centre. But a crackdown on tax evasion by US authorities in particular had led it to the negotiating table in a bid to lift the uncertainty over potential fines and even indictments of its banks.
UBS reached a landmark $780 million settlement with US authorities in 2009 after admitting it sheltered US tax cheats, providing information that has contributed to a criminal investigation currently focused on 14 other banks. Switzerland's oldest bank, Wegelin & Co, was indicted earlier this year and announced its closure, underscoring the risks for Swiss financial institutions.
The new US-Swiss agreement requires co-operating banks to tell prosecutors about Americans' assets that left Switzerland and were moved to other tax havens. The Swiss government did not give any information about the banks still under US investigation, which also include the Swiss arm of Britain's HSBC, privately held Pictet, and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank. Several of these banks have said they are preparing information on client withdrawals as demanded by US investigators, after the Swiss Government said it would allow them to circumvent secrecy and privacy laws to do so.
Pakistan's $60 million have been withdrawn from a Swiss bank and moved elsewhere. September 6, 2013 is his last day of immunity. Will Ishaq Dar enter into the same agreement with Swiss government as concluded by the USA and seek information about the $60 million that belong to Pakistan? Will he tell the nation why he is only keen to get information of local depositors under newly-inserted section 165A of the Income Tax ordinance, 2001? Citizens want to know why assets worth billions are kept abroad by many rich and mighty Pakistanis, including his own party bosses in the name of their siblings. Many want him to refute with evidence charges of investment by Ali Dar with Indian billionaire Madhu Bhindari in HDS Group in UAE [http://pkpolitics.com/discuss/topic/nawaz-sharifs-son-in-law-investing-billions-in-uae]. Nation expects that soon he will enlighten them about the story 'The truth about Rs 3.48 billion Sharifs loan default', published on April 9, 2013 in a section of Press [http://www.thenews.com.pk/Todays-News-13-22152-The-truth-about-Rs 348-bn-Sharifs-loan-default].
Let us remind Dar that according to a news item published in The Times of India of June 21, 2013 "when it comes to money in Swiss banks, Pakistan has a slight edge over India with total funds amounting to 1,441 million Swiss francs [Rs 1.52 trillion] held there by Pakistani individuals and entities. However, this was the lowest level for such funds ever since Switzerland's Central Bank began compiling this data in 2002 and was less than half of the record high amount of over 3 billion Swiss francs [Rs 4.18 trillion] recorded in 2005. The previous record low of 1.95 billion Swiss francs [Rs 2.06 trillion] was seen in the year 2010. In their local currency, the total funds held by individuals and entities from Pakistan in Swiss banks stood at over Rs 1.5 trillion as on December 31, 2012."
It was further revealed in the report that "this marked a decline of nearly 32 per cent from 2,119 million Swiss francs (Rs 2.32 trillion) at the end of 2011, as per the latest annual report of Switzerland's Central Bank on banks operating in the country. The report is shocking confirming that Pakistanis possess larger funds than Indians in Switzerland alone and were moving the same elsewhere of late. If we add Dubai and other such centres where the rich and mighty have been shifting billions, the figure would be horrendously large - many times what is lying in Switzerland. It is not a matter of a few billions - the amount is at least ten times the collection of FBR. On the one hand, Dar is begging before IMF for further loans and imposing regressive taxes on the poor and on the other, there is no political will to tax the accounts held in Switzerland and elsewhere by rich and mighty - Pakistan's tax cheats and plunders of national wealth.
The government of Nawaz for obvious reasons rejected recommendation of the Senate to seek assistance of foreign governments in taxing Pakistanis' accounts lying with them as done by India and other countries. However, the domestic law was amended giving powers to FBR to access all bank accounts within Pakistan. Such powers, according to Senate Finance Committee, were "too intrusive, against privacy of individuals and is prone to abuse and misuse." The Senate Committee was of the view that "since FBR is itself susceptible to corruption, as stated by Chief Justice of Pakistan, it will likely lead to loss of confidence of Pakistani people in their own banks, almost similar loss of confidence is suffered due to seizure of foreign currency accounts after the 1998 nuclear tests."
Dar is sleeping over summary of FBR for a new agreement with Swiss government where billions are lying but insisting on access to information of accounts held with local banks. What is the logic behind it? He further claims that information from local banks would be confined to Chairman and members of FBR. Is there any hidden agenda behind this move? If the tax evaders at home and abroad are not to be taken to task, apparently, the only purpose left could be blackmailing political opponents or safeguarding friends having accounts in fictitious names.
It is strange that the government wants complete access to local account holders but is not ready to get similar information for accounts lying outside which are depriving the national exchequer of billions of rupees in taxes. All responsible governments in the world have in recent years shown commitment to retrieve looted money or funds kept by their citizens in tax havens, but in Pakistan the PPP-led government during its five-year-tenure (2008-2013) acted as the main stumbling block to any such move. Now PML-N government, following in the footsteps of its rival predecessor, is also showing unwillingness to tax trillions kept by Pakistanis abroad.
The issue of tax avoidance by keeping accounts in tax havens has become a highly charged political issue in the world. Across much of Europe, particularly the richer northern countries are increasingly fed up with demands for bailout money from heavily-indebted countries like Greece. A key demand of a recent bailout deal announced for Cyprus was that the nation should drastically shrink its role as a financial center and, many in Germany suspect, a haven for money laundering. In Pakistan's case we are begging for bailout from the IMF while trillions untaxed are lying abroad. One hopes IMF would pressurise Dar et al to retrieve and tax these gargantuan hidden funds by taking tough measures. There should not be different standards for Europe and Pakistan as far as IMF is concerned.
(The writers, tax lawyers and partners in HUZAIMA & IKRAM (Taxand Pakistan), are Adjunct Faculty at Lahore University of Management Sciences)