Pakistan received $35 billion worth of information from the Organisation for Economic Cooperation and Development (OECD) and nearly $30 billion treasure trove turned out to be not actionable amid complaints of misuse of data by the taxmen.

Sources told The Express Tribune that in certain cases where the information was not having any tax value due to any reason, some Pakistani accountholders faced unnecessary arm-twisting at the hands of tax officials.

After the start of the exchange of information by the OECD in 2018, Pakistani authorities received $35 billion worth of information, said the sources.

The Federal Board of Revenue (FBR)’s function is limited to just recovery of due taxes on the actionable amount at prevailing rates.

The $30 billion worth of information, or 86% of the total, was useless for tax collection purposes due to duplicate reporting of accounts ($13 billion), non-resident status of these Pakistanis ($2 billion), immunity given under tax amnesty schemes ($5 billion) or information was already declared in tax returns filed with the FBR (nearly $2 billion). Another $4 billion had also been reported in previous years.

The net actionable information was $5 billion in the case of over 4,000 accounts and the FBR’s job was limited to only recovery of taxes, not the amount from the accounts, the sources added.

Out of this sum, the FBR has so far taken action in $3.3 billion worth of cases and work on the remaining information is in progress.

Out of the $5 billion actionable information, nearly half was related to the year 2020-21, said the sources.

Former prime minister Imran Khan had promised to recover $200 billion worth of looted money. But during his time, the Directorate General of International Taxes remained a neglected wing in the FBR, which had no permanent director-general.

The last government had declared the “recovery of assets stashed abroad” a high priority and also set up the Asset Recovery Unit, which eventually became a problem for the previous government.

There are allegations that the previous FBR management illegally shared the OECD information with the government, which is used against a sitting judge of the Supreme Court.

Under the OECD protocols, the OECD information can only be used for the recovery of due taxes.

The FBR faced many problems in the administration of the OECD information, which also resulted in harassment of the offshore account holders, said FBR’s former chairman Shabbar Zaidi.

He said in many cases the accountholders were not required to share the information with the FBR due to their non-resident status.

The FBR’s data showed that the OECD shared about $2 billion worth of information of over 4,000 non-resident accounts, which did not have tax value for the FBR.

Shabbar Zaidi said that the taxpayers also faced problems at the hands of the FBR due to the taxmen’s lack of understanding of the complex issues such as the status of foreign trusts, declarations given by the settler or beneficiary of the accounts and differences in reporting time of declarations given by the taxpayers and the information shared by the OECD.

The FBR record showed that the OECD shared the information of 6,000 accounts having $5 billion that was already declared through the offshore tax amnesty schemes by the taxpayers.

There were also issues of unethical practices, which “I had raised with the former finance minister Shaukat Tarin who then immediately took action”, said Zaidi.

Sources having direct knowledge of the cases said that some FBR officials tried to extort money from some of those offshore account holders whose information was shared by the OECD but they were not required to pay taxes.

In one case, one family member who was a non-resident person got tax notices while his other family members who were resident Pakistanis remained untouched, the sources claimed.

Due to complaints of “malpractices with corrupt motives”, the Federal Tax Ombudsman (FTO) office had also taken a suo motu notice and launched a probe to determine why the FBR’s three field offices were unable to fully take benefit of the OECD information.

Pakistan had received the first batch of information from OECD in September 2018 – a month after the PTI came into power – but the agreement had been signed during the tenure of the Pakistan Muslim League-Nawaz (PML-N) government.

In 2018, the FBR had received around $9 billion worth of information but the actionable information was just $1.6 billion.

Published in The Express Tribune, May 10th, 2022.

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