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May 17, 2017

Panama Leaks: Obtaining evidence from abroad to take years

Top Story

May 17, 2017

ISLAMABAD: The financial experts have underlined the fact that striking bilateral tax treaties with tax havens like British Virgin Island (BVI), achieving “active’ status for them and obtaining documentary evidence related to offshore companies, owned by Hasan Nawaz and Hussain Nawaz before expiry of 60-day deadline for Joint Investigation Team (JIT) is really a ‘hard nut to crack’ in the prevailing situation.

They said these kinds of treaties involve complicated issues that generally take years to get resolved to the satisfaction of both the countries. Moreover, when such agreements are signed, both the countries set a timeframe, may be in years, to give them ‘active’ status. Then no timeframe is generally mentioned in such treaties for entertainment of requests seeking specific information or documentary evidence about any individual or company.

But, Justice (Retd) Wajihuddin Ahmad maintained that if the children of the prime minister, who carry the burden of proof, come forward and personally take the initiative then they would be able to get all the necessary documents required to answer various questions raised by the Supreme Court.

Talking to The News, prominent economist Dr Ashfaq Hasan said that the hectic and consistent efforts by the finance and foreign affairs ministries and other relevant departments cannot ensure that Pakistan would be able to strike mutual treaties with tax havens including BVI anytime in near future.

According to the official record, Federal Bureau of Revenue (FBR) on October 18, 2016 had written letters to the governments of nine tax havens — the British Virgin Islands, Samoa, Bahamas, Panama, Seychelles, Mauritius, Niue, Anguilla and Jersey — to seek documentary evidence from their revenue authorities about 444 Pakistanis, who according to the Panama Leaks own off-shore companies in their domains. But none of them provided any kind of information to Pakistan due to absence of mutual bilateral treaty on avoidance of double taxation.

Justice (Retd) Wajihuddin Ahmad said if the JIT hires private firms or financial experts then they should get the certified information through the Right to Information Act or any similar law from BVI and other tax havens because the documentary evidence that would be acquired through hidden sources would face the issue of ‘admissibility’ in the Supreme Court.

He said any information that is obtained through unofficial channels or sources always face issue of admissibility before the court of law. So, in this case information through the relevant governments would be important in the eyes of the Supreme Court bench.

It is pertinent to mention here that Pakistan has become part of the 109-member Organisation of Economic Cooperation and Development (OECD) but it will not be able to obtain information from other countries through the multilateral Convention on Mutual Administrative Assistance in Tax Matters until September 2018.

Dr Ashfaq Hasan said it is also unclear how the JIT can utilise the Stolen Asset Recovery (StAR) Initiative by the World Bank for this purpose because besides other things it would need Pakistan to produce adequate and appropriate requests for international legal assistance to identify cross-border flow of money from corruption and tax evasion.

He said when it comes to acquiring information about beneficial owners and other related persons of the offshore companies registered in the tax havens including BVI it would always be difficult to do so because such kind of information is not made part of the public record that these tax havens can share with other countries through mutual agreements.

The BVI has high significance with regard to an important question raised by the Supreme Court in its Panama Leaks verdict that how bearer shares crystallised into the flats and who, in fact, is the real and beneficial owner of M/s Nielsen Enterprises Limited and Nescoll Limited.

While talking to this correspondent, one of the top former government investigators who played a key role in investigation into number of white-collar crimes in the past provided a detailed review of existing financial regulations in BVI and other tax havens.

A retired bureaucrat and investigator, who requested not to be mentioned, indicated that the JIT would be able to utilise all available diplomatic channels to get to the information related to the offshore companies set up by the children of Prime Minister Nawaz Sharif but the existing highly secretive financial regime in BVI would not provide it with enough opportunities to achieve its desired results.

He said first, BVI and other tax havens— Samoa, Bahamas, Panama, Seychelles, Mauritius, Niue, Anguilla and Jersey — are competitive offshore financial centres that avoid entering any information-sharing agreements with the foreign countries or organisations for exchange of financial aid because confidentiality of the client is robustly enshrined in their corporate and business legislation.

Interestingly, as far as BVI’s government is concerned it normally has no idea who actually owns the tax-free companies or what they do. The only significant information supplied to the official registry is the name of the company’s agent – one of the local firms who arrange incorporations and collect the hefty annual fees.

Secondly, he said if any country like Pakistan succeeds in striking a partial tax agreement or treaty with BVI in the shortest possible time then still it would not come into force unless necessary parliamentary procedure is completed in this tax haven.

BVI has made Tax Information Exchange Agreements with 22 countries out of which this agreement has ‘in-force’ status with 17 countries. But this agreement has ‘pending’ status with five countries — Greenland, Faroe Islands, Netherlands Antilles, Poland and Portugal — despite the fact that it was signed with these countries from 2009 to 2013.

Thirdly, he said in case any such agreement comes into force it would only enable JIT to get the public record about the offshore companies that would not include the names of the beneficial owners, directors and stakeholders.

He said the only documents held on public record are the Memorandum and Articles of Association, but these normally do not contain any indication as to the actual shareholders, directors or the beneficial owners of the company.

The retired investigator said confidentiality is one of the key features of the financial regime being pursued in BVI as details of the company beneficial owners, directors and shareholders are ‘NOT’ made part of the public record. Register of members, register of directors and all minutes and resolutions by the offshore company are kept only at the offices of the Registered Agent in complete confidentiality.        


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