Switzerland is apparently no longer a favourite offshore tax haven for Pakistanis to stash their wealth as the money kept By: the country’s nationals in Swiss banks has fallen By: 50% to the lowest level of $377 million in 2019, a new report disclosed on Thursday.
Switzerland’s central bank, the Swiss National Bank, has published its annual report, ‘Banks in Switzerland 2019’, and the corresponding data for its annual banking statistics.
Despite significant reduction in the wealth stashed in the once safest offshore tax haven, Pakistan has been unable to benefit from the development because of the two tax amnesty schemes offered By: former premier Shahid Khaqan Abbasi and Prime Minister Imran Khan.
These amnesties have allowed nearly 200 wealthy Pakistanis to whiten their black money despite being caught in exchange of information By: the Organisation for Economic Cooperation and Development (OECD).
A weak administrative structure at the Federal Board of Revenue (FBR) is another reason for not benefiting from the treasure trove shared By: the OECD.
The money that is directly linked to clients from Pakistan stood at CHF (Swiss franc) 359.6 million or $377 million in 2019, according to the annual report. It was down By: CHF 365.6 million or 53% when compared with CHF 725.2 million in 2018.
It was the consecutive fourth year when the assets of Pakistani passport holders decreased as compared to the peak of $1.5 billion in 2015.
Pakistanis have been constantly withdrawing their funds from the Swiss banks since 2015 when Pakistan and Switzerland finalised a revised taxation treaty. Since then, there has been a reduction of 75% or CHF 1.2 billion in deposits held By: Pakistanis.
However, the money held By: Pakistanis through fiduciaries or wealth managers increased By: 152% to CHF 50.5 million – a net addition of CHF 30.5 million over the preceding year.
The CHF 359.6 million was the lowest level of deposits retained By: Pakistanis since 1996 – the year when the Swiss central bank started tracking the money By: nationalities. The maximum amount of nearly CHF 2 billion was parked in the year 2002.
Former finance minister Ishaq Dar informed the National Assembly in 2014 that at least $200 billion of Pakistani money was stashed in Swiss banks. In August 2014, Pakistan initialled the revised treaty with Switzerland, which would have allowed it to get information in early 2015. But in September 2014, the then federal government decided to renegotiate the treaty despite initialling the agreement.
In May 2017, the federal cabinet finally ratified the revised bilateral treaty but it did not cover old transactions.
Prime Minister Imran Khan and his cabinet ministers, particularly Communications Minister Murad Saeed, have claimed that they would bring back $200 billion that Pakistanis had presumably stashed in Swiss banks.
However, there has been no any progress on this issue during the 22-month rule of the PTI government.
There is a possibility that Pakistanis may still have more than CHF 359.6 million deposits but these are hidden through various modes. According to FBR officials, the UAE’s iqama is one such method. The money held By: the UAE iqama holders is shown against the UAE nationality, they said.
Former FBR chairman Shabbar Zaidi had claimed that the UAE agreed to share information with Pakistan but since then there has been no further progress on the matter.
The two tax amnesty schemes given By: the PML-N and the PTI governments have also caused significant revenue losses to the FBR despite the availability information about offshore assets.
Pakistan had received the information from OECD in September 2018 and then again in October 2019.
According to the 2018 information, about 57,450 people owned $7.5 billion deposits through 154,000 bank accounts. As of November 2019, the recoveries against this information were only $6 million, according to the FBR Directorate General of International Taxes.
Of the 57,450, the majority of the people – 36,859 – owned less than $100, according to the FBR international taxes DG’s presentation to a parliamentary committee.
Tax loss of amnesties
Another presentation By: the FBR international taxes DG to the National Assembly Standing Committee on Finance in November last year had revealed that governments of Prime Minister Imran Khan and former premier Shahid Khaqan Abbasi had given Rs61.4 billion in tax relief to just 191 billionaires, who had been caught owning offshore assets but were bailed out through the two tax amnesty schemes.
These 191 people had declared Rs94.2 billion worth of assets By: paying only Rs4.6 billion in taxes.
As many as 135 persons, named in the OECD database, availed the 2018 tax amnesty scheme of the PML-N and declared Rs62.4 billion in assets. They paid Rs2.9 billion in taxes.
About 56 people, whose data was shared By: the OECD, availed the PTI’s tax amnesty scheme and declared Rs31.8 billion worth of assets, showed the FBR presentation. They paid only Rs1.7 billion in taxes and got a relief of Rs20.6 billion. The FBR has not yet shared the outcome of the 2019 OECD exchange of information.
Due to FBR’s poor handling of offshore cases and weak laws, Her Majesty’s Revenue and Customs (HMRC) of the UK that was providing help to improve recovery from multinational companies through audit has decided to pull out of Pakistan. The tax authorities have denied that the HMRC has severed relations with the FBR.