SBP Investigation shows Pakistani account holders transferred $15.25 billion out of the country

According to a report submitted to the Supreme Court by a 12 member committee headed by the Governor of SBP, Tariq Bajwa, Pakistani account holders transferred USD 15.25 Billion through normal banking channels in the year 2016-17.

The committee was setup on the orders of Chief Justice Saqib Nisar to trace undeclared foreign assets by Pakistani citizens.

Key pointers from the court document:

• Sum of $15.25 billion transfer during 2016-17
• Individuals account holders transfer huge amount through banking channels
• A substantial also transferred through abroad through hundi and hawala
• Information part of report submitted to Supreme Court
• 12-member committee of experts headed by SBP submits report
• Committee constituted by on orders of three judge SC bench headed by Chief Justice
• Committee tasked to trace assets and bank accounts stashed abroad by Pakistanis
• Court initiated suo motu pertaining to illegal transfer of money
• Committee stated outflows had huge impact on the stability of the country’s foreign exchange reserves
• Outflows adversely affected the exchange rate of the Pakistani rupee
• Trend could cause undue and disruptive inflation

The Committee delineated the following factors caused substantial foreign exchange outflows from Pakistan:

• Cash feeding of foreign currency accounts and the immunity of such transactions and the movement of funds deposited in foreign currency accounts.
• Free cash movement of foreign currency of any amount within and out of Pakistan
• Laxity in the regulatory framework for the retained portion of export proceeds facilitating leakage and the accumulation of undeclared assets abroad.
• Under invoicing and over-invoicing in foreign trade transactions.
• Remittance through normal banking channels as black money stashed abroad could be whitened without payment of tax
• The Hundi and Hawala means of foreign currency transfers have remained available in the market for transfer of ill-gotten or tax evaded funds.
• Short limitation periods in tax laws for initiating legal action against tax evaders and defaulters have blocked assessment and recovery of tax on global income and wealth of citizen.
• Scant bilateral tax treaties with other countries for exchange of information have hampered detection of foreign assets accumulated by citizen.
• Lacunae in tax laws and regulations have enabled avoidance of tax on technical grounds.
• Failure of the present income and wealth tax declaration forms to require disclosure of foreign assets and income of citizen.