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Swiss accounts: Pakistan strives to bring back money from Swiss banks
By Saad Hasan
Published: November 14, 2013
This strategy of white money for powerful countries and black money for others is what Swiss campaigner Andreas Missbach calls the ‘Zebra’ strategy. PHOTO: FILE
KARACHI: It didn’t make to the primetime news but buried under piles of documents carrying details of hundreds of dead people there was something that would bother the Pakistani elite.
During Supreme Court of Pakistan’s suo motu hearing on the Karachi law and order case, the government communicated details about steps its various agencies have taken to control the situation.
Checks on import of arms have increased, efficient software is being used to plug sales tax leakages and an agreement with Switzerland is being revisited to gain access to foreign bank accounts where Pakistanis have stacked their ‘ill-gotten’ wealth.
The apex court was told that Federal Board of Revenue (FBR) has received the government’s approval to renegotiate a bilateral treaty on double taxation with Switzerland. Even the foreign office has been approached to start work at the earliest, it was submitted.
“Yes, we have asked our legal department to start work on it,” said Shahid Hussain Asad, FBR’s spokesman. “But it will take some time. The treaty can’t be renegotiated overnight.”
The Agreement for Avoidance of Double Taxation was last ratified in 2008. It saves individuals and companies from paying income tax more than once as money moves between Swiss Federation and Pakistan.
No one knows for sure how much money is kept in Swiss banks by Pakistanis, but estimates have varied between $50 billion and $200 billion.
“Certainly it is in billions of dollars,” says Raziur Rehman, former chairman of Securities and Exchange Commission of Pakistan (SECP). “But the question is if the money is still there. Americans went after some of its organisations, which simply moved on to other safe havens.”
Stringent secrecy laws in Switzerland helped its banks invite clients from around the world. From large corporations avoiding tax to government officials taking graft money everyone used these banks to keep offshore accounts.
Since global financial meltdown, Swiss banks came under increasing pressure from United States and European Union to share information. Even India has stepped up efforts to catch tax evaders.
However, a recent report of London-based Tax Justice Network says that Swiss banks are resisting efforts from developing countries to access the information.
“This strategy of white money for powerful countries and black money for others is what Swiss campaigner Andreas Missbach calls the ‘Zebra’ strategy,” the report adds. It says Swiss banks had approximately $2.8 trillion in assets in 2008.
How did it start?
Earlier this year, the International Consortium of Investigative Journalists (ICIJ) released details of more than 100,000 secret companies and trusts created in tax havens like Cayman Islands and Singapore. It is believed that names of 40 Pakistani businessmen and politicians also surfaced in the search. No one in the government followed up the expose.
Until 1991, Pakistanis were not allowed to maintain foreign currency accounts. It was during the economic liberalisation scheme of Nawaz Sharif’s first government in 1992 people were allowed to move money.
Ex-BCCI executive A B Shahid says it was a wrong decision to allow everyone to move money to foreign accounts. “Only the people involved in foreign trade should have been given this facility.”
Inconsistent policies of successive governments pushed businessmen to make investments abroad. Under and over-invoicing was extensively used to keep cash in offshore accounts, he says.
Tread the line carefully:
Ahmer Bilal Soofi, senior advocate Supreme Court, warns against going overboard with the drive to bring back the money. “I believe the courts and government’s investigative agencies should use restraint.”
Not all the money kept in foreign accounts is ill-gotten wealth, he said. Lawyers look at the accounts in two categories: one carrying legitimate money and the other is illegal. Then there are two sub categories for legitimate money: one on which tax is paid and the other on which tax has not been paid, he said.
“Frankly speaking I have no problem with legitimate money. Problem is with the money linked with crime, which arises from kidnapping, extortion and corruption.”
“For every case, the Swiss authorities would require judgements from Pakistani courts. Instead of trying to retrieve all of that, government should come up with a way to impose an income tax.”
Published in The Express Tribune, November 14[SUP]th[/SUP], 2013.
By Saad Hasan
Published: November 14, 2013
KARACHI: It didn’t make to the primetime news but buried under piles of documents carrying details of hundreds of dead people there was something that would bother the Pakistani elite.
During Supreme Court of Pakistan’s suo motu hearing on the Karachi law and order case, the government communicated details about steps its various agencies have taken to control the situation.
Checks on import of arms have increased, efficient software is being used to plug sales tax leakages and an agreement with Switzerland is being revisited to gain access to foreign bank accounts where Pakistanis have stacked their ‘ill-gotten’ wealth.
The apex court was told that Federal Board of Revenue (FBR) has received the government’s approval to renegotiate a bilateral treaty on double taxation with Switzerland. Even the foreign office has been approached to start work at the earliest, it was submitted.
“Yes, we have asked our legal department to start work on it,” said Shahid Hussain Asad, FBR’s spokesman. “But it will take some time. The treaty can’t be renegotiated overnight.”
The Agreement for Avoidance of Double Taxation was last ratified in 2008. It saves individuals and companies from paying income tax more than once as money moves between Swiss Federation and Pakistan.
No one knows for sure how much money is kept in Swiss banks by Pakistanis, but estimates have varied between $50 billion and $200 billion.
“Certainly it is in billions of dollars,” says Raziur Rehman, former chairman of Securities and Exchange Commission of Pakistan (SECP). “But the question is if the money is still there. Americans went after some of its organisations, which simply moved on to other safe havens.”
Stringent secrecy laws in Switzerland helped its banks invite clients from around the world. From large corporations avoiding tax to government officials taking graft money everyone used these banks to keep offshore accounts.
Since global financial meltdown, Swiss banks came under increasing pressure from United States and European Union to share information. Even India has stepped up efforts to catch tax evaders.
However, a recent report of London-based Tax Justice Network says that Swiss banks are resisting efforts from developing countries to access the information.
“This strategy of white money for powerful countries and black money for others is what Swiss campaigner Andreas Missbach calls the ‘Zebra’ strategy,” the report adds. It says Swiss banks had approximately $2.8 trillion in assets in 2008.
How did it start?
Earlier this year, the International Consortium of Investigative Journalists (ICIJ) released details of more than 100,000 secret companies and trusts created in tax havens like Cayman Islands and Singapore. It is believed that names of 40 Pakistani businessmen and politicians also surfaced in the search. No one in the government followed up the expose.
Until 1991, Pakistanis were not allowed to maintain foreign currency accounts. It was during the economic liberalisation scheme of Nawaz Sharif’s first government in 1992 people were allowed to move money.
Ex-BCCI executive A B Shahid says it was a wrong decision to allow everyone to move money to foreign accounts. “Only the people involved in foreign trade should have been given this facility.”
Inconsistent policies of successive governments pushed businessmen to make investments abroad. Under and over-invoicing was extensively used to keep cash in offshore accounts, he says.
Tread the line carefully:
Ahmer Bilal Soofi, senior advocate Supreme Court, warns against going overboard with the drive to bring back the money. “I believe the courts and government’s investigative agencies should use restraint.”
Not all the money kept in foreign accounts is ill-gotten wealth, he said. Lawyers look at the accounts in two categories: one carrying legitimate money and the other is illegal. Then there are two sub categories for legitimate money: one on which tax is paid and the other on which tax has not been paid, he said.
“Frankly speaking I have no problem with legitimate money. Problem is with the money linked with crime, which arises from kidnapping, extortion and corruption.”
“For every case, the Swiss authorities would require judgements from Pakistani courts. Instead of trying to retrieve all of that, government should come up with a way to impose an income tax.”
Published in The Express Tribune, November 14[SUP]th[/SUP], 2013.
