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Offshore assets now easier to hide with amended wealth statement form

ISLAMABAD: In a move that may undermine the drive against tax evasion, amendments in the wealth statement form that the government introduced over a year ago has reduced the disclosure requirements for those taxpayers who own offshore assets.

The government has separated the disclosure requirements for assets held inside and outside Pakistan, making the disclosure rather more discretionary in case of offshore assets.

The Federal Board of Revenue (FBR) made the changes in the Statement of Assets and Liabilities, commonly known as the Wealth Statement, in December 2016 that it reaffirmed in the version it issued six months ago for tax year 2017.
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At least one business family that has been named in the Panama Papers could escape the law, as it mentioned the assets in more general terms in the wealth statement without giving the exact description of the offshore assets, said sources in FBR.

All individual taxpayers are required to file the Wealth Statement along with Return of Income for each tax year. In this regard, a form has been prescribed for that in Chapter XIX of the Income Tax Rules, 2002. The changes have been made in this form.

Old form

Under the old, now amended, form, a taxpayer was required to declare his assets outside Pakistan under each category and provide complete particulars and description of each asset. The taxpayer had to explicitly state the nature of immovable and moveable property and asset outside Pakistan including minute details like type of property and complete address.

In the serial number 15 of the form, the taxpayer had to declare its total assets inside and outside Pakistan.

This would have made difficult for people to keep their assets hidden after global drive against money laundering and tax evasion, supported by the Organization for Economic Cooperation and Development (OECD)

The Supreme Court is currently hearing a case on the offshore assets of Pakistanis and possibility to retrieve and bring them back.

New form

Now the tax authorities have changed the prescribed form. In serial number 15, the disclosure requirement of the total assets has now been restricted to “Total Assets inside Pakistan. A new serial number 16 has been inserted with narration “Assets held outside Pakistan”

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This would allow the taxpayers to only mention the foreign assets in lump sum, without giving details of nature of the property, asset and their locations, said the sources. The taxpayer would not be required to identify the asset.

When contacted, a senior FBR officer agreed that the discretion in full disclosure of offshore asset including particulars may be misused by the taxpayer. But he said that this would not limit the FBR’s authority to ask the source of income, if the asset is highlighted in a third party report like OECD.

The FBR’s decision to reduce the disclosure requirements for assets held outside Pakistan is by design, which benefits those people who have hidden their assets abroad, said Dr Ikram ul Haq, advocate Supreme Court of Pakistan.

Haq suggested that disclosure requirements for assets inside and outside Pakistan should be the same aimed at eliminating the discretion of the wealth statement filer.

In case of the old pre-defined format which was enforced through FBR’s Iris system, the statement filing was impossible without providing the full identification of the asset.

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