FBR Updates Supreme Court on Recovery of Funds from Foreign Accounts

Islamabad, Pakistan: The Federal Board of Revenue (FBR) has informed the Supreme Court that it has recovered Rs880 million from Pakistanis holding foreign accounts and properties.

The information was shared during a hearing before a six-judge bench led by Chief Justice Aminuddin. The FBR representative, Advocate Hafiz Ehsaan Ahmad Khokhar, highlighted the efforts made by the tax authorities to trace and recover funds held abroad.

The FBR’s actions are based on the recommendations of a committee formed by former Chief Justice Saqib Nisar in 2018 to investigate offshore assets held by Pakistanis. The committee’s report led to significant amendments in the Income Tax Ordinance, 2001, including stricter provisions for the declaration and taxation of foreign assets.

The Supreme Court expressed satisfaction with the FBR’s progress and directed the authorities to continue their efforts to bring back illicit funds and ensure that all taxpayers fulfill their tax obligations.

Key legislative changes have significantly impacted taxpayers, especially those with international financial interests:

Disclosure and Tax Liability: Individuals with undisclosed foreign accounts or properties now face retroactive taxation, with no time limitation for concealed foreign income or assets. This eliminates the previous five-year cap for tax assessments, ensuring that hidden wealth, regardless of its age, can be taxed.
Lowered Remittance Thresholds: The threshold for questioning the source of foreign remittances was reduced from Rs10 million to Rs5 million, bringing more transactions under the purview of the tax authorities.
Amnesty Schemes: Through various schemes, such as the Assets Declaration Ordinance, 2019, individuals were encouraged to disclose undeclared wealth voluntarily, benefiting from reduced penalties but also entering the tax net.

The FBR’s measures have dual implications:

Revenue Generation: The recovery of Rs880 million demonstrates the potential to enhance tax revenues, reducing reliance on external debt and supporting domestic development initiatives.
Enhanced Compliance: With stronger enforcement mechanisms and international collaborations, taxpayers are more likely to comply with disclosure requirements, fostering a culture of transparency.

Challenges for Taxpayers

For many individuals, these policies pose significant financial and procedural challenges:

Increased Scrutiny: Those with legitimate foreign income may face intensive audits to justify the nature and sources of their wealth.
Potential Financial Strain: Retroactive taxation and penalties could impose a heavy financial burden on individuals who failed to declare their foreign holdings.