Owning assets overseas is not a crime

KARACHI: Since disclosure and identification of offshore companies owned by Pakistanis leaked from a Panama entity have raised many questions in respect of the prevalent taxation regime in Pakistan, Syed Mohammed Shabbar Zaidi, a chartered accountant by profession and a former caretaker minister of Sindh in 2013, led a discussion titled ‘Panama Leaks, a blessing in disguise’, to elaborate on the importance of how the leaks can be a blessing in disguise during his lecture at Habib University on Wednesday.

The discussion elaborated on the contents of his book on the same issue and focused on how the issue of Panama Leaks is always negatively comprehended, while missing its covert advantages.

The primary focus of the talk was on the speaker’s statement that owning of offshore assets was not a crime and how the laws and taxation policies were of advantage to all parties involved in the matter, including the state and property owners.

All Pakistani tax residents should be required to disclose their global assets, whether declared in the past or not. Such declaration should be segregated into two parts — assets acquired before the last five years and assets acquired within the last five years.

He went on to further explain that there are no taxable consequences for the assets acquired before last five years. With respect to assets acquired within the past five years, if such assets have been formed out of income chargeable to tax in Pakistan then such declaration be considered valid if an amount equal to 10 per cent is paid on the current value (not the cost) of such assets if declared before June 30, 2017.

Mr Zaidi then elaborated on Section 111 of the Income Tax Ordinance, 2001. He said it should not be applicable on such assets and there should not be any requirement to bring back such assets to Pakistan.

“Pakistani citizens have the right to hold foreign assets,” he said, explaining the manner of accumulation ie export commission, import commission, income earned abroad and funds transferred from Pakistan.

He termed Panama Leaks a blessing because as all the assets are disclosed, the Pakistani state is now able to work towards better addressing the problem at hand, ie working towards the betterment of the state so that companies are compelled to invest locally and also address issues regarding the non-residency conditions which many businessman exploit.

The discussion was moderated by Dr Fahd Ali, Habib University’s director of social development and policy programmer, who touched upon the legal position on matters relating to disclosure for Pakistan’s tax purposes and foreign exchange laws, including anti-money laundering laws for assets held outside Pakistan.

Published in Dawn