TAX NEWS APRIL 28, 2016

1.      Pending revenue judicial cases of overseas Court officers given 90-day deadline

April 28, 2016

The Board of Revenue has given its court officers a 90-day deadline to finish up with pending revenue judicial cases of overseas Pakistanis. And a meeting to settle modalities took place on Wednesday between Punjab Overseas Pakistanis Commission and senior board member Jawwad Rafique Malik to deal with the cases quicker.

2.      1992 law major obstacle: Senate body given a reality check

April 28, 2016

Senate Standing Committee on Finance on Wednesday observed that it would be extremely difficult to prove wrongdoings in the presence of Protection of Economic Reform Act 1992 and the absence of required laws to seek official records from foreign countries known as tax havens. During the committee proceedings, State Bank of Pakistan (SBP) officials assured the committee to assist the proposed Judicial Commission to investigate the Panama Leaks. Senate Standing Committee on Finance held its meeting under the chairmanship of Senator Saleem Mandviwalla here at the Parliament House on Wednesday.

The SBP, SECP and one legal expert presented their opinions before the committee members on the issue of offshore companies and the Panama leaks. Mandviwalla and others were unanimous that nothing substantial would come out from the probe of Panama Leaks in the presence of some laws providing protection to those remitting their money outside Pakistan and in the absence of Avoidance of Double Taxation and mutual legal assistance treaties with countries known as tax havens.

The committee was informed that there is no such restriction under the Protection of Economic Reform Act 1992. The information took the members by surprise with Senator Mushahidullah saying "so there is nothing like money laundering from Pakistan". Senator Mohsin Leghari, however, asked: "So why are you holding that model Ayyan Ali for carrying $500,000?"

Officials of Securities and Exchange Commission of Pakistan (SECP) informed the committee that there were 192 companies in Pakistan in which offshore companies were making investments. "We have found that many companies were investing in offshore companies and it is a routine matter," they said. A legal expert/lawyer, Mehmood, who was invited on special invitation of the committee, said that Pakistan should become a signatory to the OECD convention having 60 members including some of them known as tax havens such as Switzerland as these would start sharing information about account holders in 2017 and beyond. India, he said, also became its signatory and would be able to draw details of bank account holders from September 2017. Nothing much could be done at the existing stage as Islamabad had signed Mutual Legal Assistance (MAL) treaties only with five countries: Tajikistan, Uzbekistan, Sri Lanka, China and Turkey.

He said the tracking this money trail from Pakistan was next to impossible. He highlighted that there were several places around the world that were known as ''''treasure islands'''' because they were the hub of off-shore companies. Due to the absence of required laws to seek official records from foreign countries these places are known as tax havens, but he added that all off-shore businesses are not illegal. These places are mostly the British Virgin Islands which house more than 40 percent of world''''s off-shore companies, the expert said.

He added that around almost half of world trade and one-third of global wealth was in these off-shore companies. At the same time the Protection of Economic Reform Act 1992 was similar to the off-shore companies.

Deputy Governor SBP Saeed Ahmed Khan told the committee that the regulator would be willing to assist the Judicial Commission in its probe. The SBP official said the SBP could grant permission up to $5 million remitting outside Pakistan while any amount of $5 million and above would require the approval of Economic Co-ordination Committee (ECC), he added. It is expected that the FBR will brief the Senate Standing Committee on Finance on offshore companies and tax issues in a meeting to be held on Thursday (April 28).

3.      FBR's plea: SC reserves verdict

April 28, 2016

The top court on Wednesday reserved its judgement in response to a Federal Board of Revenue appeal filed against Sindh High Court verdict that had turned down the decision of Customs, Excise and Sales Tax Appellant Tribunal Karachi Branch by allowing D G Khan Cement Company the imports of dump trucks within the purview of plant and machinery as contemplated in the SRO SRO-484(I)92.

Concluding his arguments before a three-member bench of acting Chief Justice Mian Saqib Nisar, Justice Azmat Saeed Sheikh and Justice Faisal Arab on behalf of D G Khan Cement Company in the matter Salman Akram Raja said that industrial plant includes dump trucks.

Challenging the High Court's verdict before the apex court, the Federal Board of Revenue had urged the apex court to decide two questions of law; whether the learned division bench of the High Court of Sindh has misinterpreted the exemption notification by defining the off Highway Dump Trucks as of plant and machinery and for setting up new industrial unit and for expansion or balancing, modernisation and replacement thereof and bringing the same within the purview of the said notification; and whether the division bench of the High Court of Sindh has erred in law by failing to appreciate the overriding fact of the statuary provisions of Customs Act, 1969 for the purposes of levying customs duty and taxes on import of goods particularly referring to Section 18 with first schedule of the Customs Act and classification of the goods.