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Information disclosed in 'leaks' cannot be certified, says revenue minister

Information disclosed in 'leaks' cannot be certified, says revenue minister

Investigating people accused of buying offshore companies to take advantage of tax havens is challenging for the Federal Bureau of Revenue (FBR) as the board has limited authority, the Prime Minister's Special Assistant on Revenue, Haroon Akhtar Khan, said in an interview to DawnNews on Tuesday.

He was speaking in light of the recent 'Paradise Leaks' which have outed a number of prominent Pakistanis who have used offshore tax havens to hoard wealth.

If someone is named in an offshore tax haven scandal and the money has been transferred to a local bank, Akhtar said, the most FBR can do is ask whether he had filed the interest received over five years leading to the revelations.

"If a person has filed their returns, the FBR can only track assets that he has acquired within five years," he explained. "In case returns have not been filed, the board can only track assets acquired within the decade."

Leaked information, Akhtar said, is usually limited to names of companies and individuals and cannot be considered evidence in a court of law because the information revealed is not certified.

Read: Paradise Papers: ICIJ names Shaukat Aziz in leaked documents regarding offshore firms

"We have to find out if anyone apart from the person(s) named is involved. We need to certify data, which includes addresses, national identity card numbers, national tax numbers, etc," Akhtar said.

Once that information is acquired, inquiry letters are sent, asking whether the person(s) is affiliated with the offshore company or not. Some admit their involvement while others don't; however that doesn't really prove that the offshore company was created to evade taxes, according to Akhtar, because the assets owned by the companies are not revealed in the leaks.

"The information is not certified, so we have to investigate its authenticity first," he insisted. "We can only be sure of that information if we receive records from the country's government [where the tax haven is created] or from a bank or another official source."

Another factor that limits FBR's operations is the restricted flow of information. Due to lack of agreements with other countries, FBR cannot acquire tax evasion records from other countries' governments.

Nonetheless, Akhtar assured that the investigation of the so-called Paradise Leaks would be swift because the FBR will take advantage from its "experience of Panama Leaks proceedings".

Akhtar said that after Pakistan becomes a signatory of the Organisation for Economic Cooperation and Development (OECD), it will become easy for the board to gather information about tax evaders from anywhere in the world.

Other laws passed by the government will also help the FBR take action against tax evaders. A deal on avoidance of double taxation was signed between Switzerland and Pakistan in March this year, which will allow both countries to shore up information-sharing mechanisms that will help detect tax evaders who have stashed their assets in Swiss banks. The agreement is expected to come into force in Pakistan from July 2018.

Tax-evaded money stashed in benami accounts will not be safe either due to the recent Benami Transactions (Prohibition) Act 2016 that was passed by the Senate after being amended, Akhtar told DawnNews.

The Anti-Money Laundering Act 2010 will also enable the FBR to take action against tax evaders.

"The grip around tax evaders is being tightened," he exclaimed. "It won't be easy to evade taxes any more."

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