PATRIOTIC_PAKISTANI
Minister (2k+ posts)
Unfortunately Panama Leaks issue is dragging our country towards another anarchy. Obviously this issue needs dealing with; our leaders do not hold enough dignity to step down as leaders in other worlds normally do when serious questions are raised regarding their finance. They come in power to get more stronger (financially and politically) and our history tells us they (Political or Dictators) never go away right up until they are thrown away somehow, but it also causes a lot of damage to the country and hence public.
So, it is very important for public to understand the issue before raising your voice and choosing the sites.. I as a Pakistani would try to keep my personal choice and party affiliations aside to asses who is right and who is wrong here. Our Journalists, media, public and politicians seems all taking sides of their political leaders without actually understanding the substance of subject - "What really is Panama Leaks".
What i can do for my fellow forum members is to clarify what Pamana and Offshore issue really is. My request for all my fellow countrymen would be keep their affiliations aside for the good of the country.. please please please... just do it for once..
So, coming to the topic, Offshore Companies could be legitimate or illegitimate, it simply depends upon the purpose they are opened for, i.e. to do normal business, as a tax advantage and for tax avoidence, for evading tax, for money laundering etc.
Type of Offshore Structures:
Shell companies
A shell company has the outward appearance of being a legitimate business. But it is just an empty shell. It does nothing but manage the money in it, while hiding who owns the money. Its management is made up of lawyers, accountants or even the office cleaner, who do little more than sign documents and allow their names to appear on the letterhead. When the authorities try to find out who really owns or controls the money in the company, they are told the management does, but it is all just a front. Someone else is just paying them so they can hide their money from the authorities or in some cases their ex-wives. Shell companies can also be called "letterbox" companies, as they consist of little more than an address to post documents to.
Offshore Financial Centre
If you have a shell company, you don't want it based in London or Paris where the authorities can normally find out who owns it, if they really want to. You need an Offshore Financial Centre, or what is often called a tax haven. These are normally based in small island countries (hence the name), with a great deal of banking secrecy and very low or non-existent taxes on financial transactions. There are many such countries or authorities around the world, from the British Virgin Islands, to Macao, the Bahamas and Panama. Even in such places most of the financial services are perfectly legal: it is just the secrecy which also makes them very attractive to tax evaders and crooks the world over, especially if the regulators are weak or turning a blind eye.
Bearer shares and bonds
For that extra layer of anonymity and so that you can move large amounts of money around easily, bearer shares and bonds are an obvious answer. Every British 5 note has the words "I promise to pay the bearer on demand the sum of five pounds". That means if it is in your pocket it is yours: the person "bearing" or carrying the cash owns it, can spend it or do what they like with it. Bearer shares and bonds work in the same way, the person who has it in their pocket, briefcase or safety deposit box owns it. But they aren't worth 5. Bearer bonds normally come in nice round figures like 10,000. Very handy if you want to move vast amounts of money around and great if you want to deny ownership. If the bond is kept at a lawyer's office in Panama, who is to know whether it is yours, or even that it exists? This helps to explain why the US government stopped selling bearer bonds in 1982. They were just too easy for crooks to use.
Money laundering
Money laundering involves cleaning "dirty" money so that you can use it without arousing suspicion. If you are a drug dealer, fraudster or, let's say, a corrupt politician you will have a lot of cash and no way of spending it or hiding it for a rainy day, without giving the game away. The money needs cleaning, so you can ship it to a dodgy firm in an Offshore Financial Centre and they might help you convert it into bearer bonds, owned by a shell company that no one knows about. You could also use it to buy a bolt-hole in London or the South of France in case of a coup, maybe pay the kids' school fees or fund a great aunt's shopping trips to Paris.
Tax Evasion Vs Tax Avoidence
Of course everyone is allowed to avoid paying tax if they possibly and legally can. It is perfectly legitimate e.g. - UK has one of the most complex and rebust taxation system in the world but indeed the UK government encourages taxpayers - to save in a tax-free Individual Savings Account (Isa), for example.That means you do not pay any income tax on the interest you receive, or capital gains tax when you come to sell. There are also tax-saving advantages to putting money into a pension scheme, donating to charity via the gift aid scheme, or claiming capital allowances on things used for business purposes.
Another example could be by choosing a strucuture of payment within your own limited company, putting yoursleves as employee, paying a minimum wage upto your personal allowance and taking rest as dividends (There is less tax on dividends), it is tax avoidene cum tax planning.
But tax reliefs and rules are open to abuse. So every individual is required to declare their money from whatever source they have, and then it is upto Govt to assess whether tax avoidence in hide of tax planning used are allowed or disallowed.
Companies like Apple, Starbucks, Topman and many other are avoiding tax by registering in countries like Northern Ireland where Corporation tax rates are low as 12.5% as compared to US where it is probably upto 40%. So companies use laws and regulations in different countries for their tax advantage, same is case with individuals who does this with small companies.
Tax Evasion on the other side is illegal and criminal activity, and people pay fines, penalties and face imprisonment for doing this. a simple example could be ; if i am a Pakistani resident, i have put money in offshore structures and never declared income from these assets in my yearly tax returns, nor i ever paid taxes on them in my resident country than it is certainly a tax evasion. Here i am not doing tax avoidence but i am either hiding the source of funds invested or trying to evade tax (as i dont wana pay it)..
Issue in Pakistan
Imran Khan's offshore Company Setup.
First of all PTIs stance about offshore strucutures has been wrong by declaring all of these as illegal. Now as they sowed in their stance by declaring all offshore structures as illegal (Reffering to IK tweets), they are now going to reap it as IK had his own offshore investment company. So the leadership may end up in some embarassment & weaken its case against the govt.
However apart from their stance and looking at legal side of it, my view is that IK setup his company in the UK to buy his flat (as he was not permanent resident) and it was tax advantegous, specially if you have intention to sell this property in the future with the intention to move aborad. In this case and Capital Gains tax could be avoided in the year when you sell it and are non resident, however you would be required to declare these funds in you tax returns and in accordance with the rules of the countries where you are moving your funds too... However there are ways to borrow money from someone and move them as gift before the sale of such properties and in that case money coming in from abroad in Pakistan could be shown as income from gift scheme which doesnt attract any taxes (any Pakistani CA might correct me on on this point).
I don't see IK would have much problems with his taxes side (as he mentined he declared it and was paying taxes on it) and he has declared the property (Offshore strucutre was just used to buy this property) but he would pay a price in terms of satisfying his supporters about his previous stance... lets see what he has to say tomorrow in the parliament. He should bring copies of his, salary slips to show when and how money was saved, his tax returns to support these, give reason of why offshore company was set up for residential property and whether he evaded any tax in pakistan when he moved all this money and how was it shown... If he does that he would come clean.
Shariff' Family's offshore Company Setup.
Shariff family put themselves into trouble by giving different statements on different times... It looks like they had these properties since early 1990's (Don't want to go in details again as Media, Ch Nisaar and other oposition leaders have been discussing these by referring to videos and interview of shariff family), also it is backed by possession and repossession case of some of these properties in 1999 i believe. Issue with their offshore strucures as apposed to IKs seems to be a doubt of either tax evasion or money laundering issue. If i was close to PM, i would have suggested him to put forward his tax returns for 1990's to 2013 (Whether local, nil or forerign returns). Obviously his kids got money off him when they were teenager and build up these investment property companies... So effectively all they need is to show Trail of these funds (where did the millions of s come from), how were they transferred , why offshore structures and whether taxes were paid, and offcource their income tax returns. Bank statements, money transfer documents, and tax returns ... all is what is required. If they do that, they wouldn't need any comission and they would come clean if all that is shown clearly and proper taxes has been paid.. If they come out as they did so for tax planning, or tax avoidence they might not have issue again but the most important bit is declaration of these properties is must.
Leaked Documents
There are hundreds of companies in tax heavens. we have seen leaked documents from one company only, do you really think Malik RIaz, Zardari and others wouldnt have such properties, offcourse they have.. but they are hidden and there is no trace of em, unless such documents are leaked or world force countires like channel island, swis and panama to release details of ownerships of such companies...
Summary:
Please do not support PM or IK, just because you support their party, you are paid by Mariam' Nawaz social media team or whether you are paid by their opponents. Its a matter of our country.
If IK declares his returns in the parliament with full trail about source of this money then he would put more pressure on PM, however, he would still need clarifying his previous stance to his workers.
PM should come clean with his returns, (Not commissions), public will believe in the documents they are going to present.
I would like my fellow forum members for the sake of survival of our beloved country to have constructive debate on this thread and to make up your stance based on educated information and not merely based on your party affiliation..
Disclaimar: above should not be used as a tax advice :) and it solely written for discussion in siasat.pk by Patriotic Pakistani
So, it is very important for public to understand the issue before raising your voice and choosing the sites.. I as a Pakistani would try to keep my personal choice and party affiliations aside to asses who is right and who is wrong here. Our Journalists, media, public and politicians seems all taking sides of their political leaders without actually understanding the substance of subject - "What really is Panama Leaks".
What i can do for my fellow forum members is to clarify what Pamana and Offshore issue really is. My request for all my fellow countrymen would be keep their affiliations aside for the good of the country.. please please please... just do it for once..
So, coming to the topic, Offshore Companies could be legitimate or illegitimate, it simply depends upon the purpose they are opened for, i.e. to do normal business, as a tax advantage and for tax avoidence, for evading tax, for money laundering etc.
Type of Offshore Structures:
Shell companies
A shell company has the outward appearance of being a legitimate business. But it is just an empty shell. It does nothing but manage the money in it, while hiding who owns the money. Its management is made up of lawyers, accountants or even the office cleaner, who do little more than sign documents and allow their names to appear on the letterhead. When the authorities try to find out who really owns or controls the money in the company, they are told the management does, but it is all just a front. Someone else is just paying them so they can hide their money from the authorities or in some cases their ex-wives. Shell companies can also be called "letterbox" companies, as they consist of little more than an address to post documents to.
Offshore Financial Centre
If you have a shell company, you don't want it based in London or Paris where the authorities can normally find out who owns it, if they really want to. You need an Offshore Financial Centre, or what is often called a tax haven. These are normally based in small island countries (hence the name), with a great deal of banking secrecy and very low or non-existent taxes on financial transactions. There are many such countries or authorities around the world, from the British Virgin Islands, to Macao, the Bahamas and Panama. Even in such places most of the financial services are perfectly legal: it is just the secrecy which also makes them very attractive to tax evaders and crooks the world over, especially if the regulators are weak or turning a blind eye.
Bearer shares and bonds
For that extra layer of anonymity and so that you can move large amounts of money around easily, bearer shares and bonds are an obvious answer. Every British 5 note has the words "I promise to pay the bearer on demand the sum of five pounds". That means if it is in your pocket it is yours: the person "bearing" or carrying the cash owns it, can spend it or do what they like with it. Bearer shares and bonds work in the same way, the person who has it in their pocket, briefcase or safety deposit box owns it. But they aren't worth 5. Bearer bonds normally come in nice round figures like 10,000. Very handy if you want to move vast amounts of money around and great if you want to deny ownership. If the bond is kept at a lawyer's office in Panama, who is to know whether it is yours, or even that it exists? This helps to explain why the US government stopped selling bearer bonds in 1982. They were just too easy for crooks to use.
Money laundering
Money laundering involves cleaning "dirty" money so that you can use it without arousing suspicion. If you are a drug dealer, fraudster or, let's say, a corrupt politician you will have a lot of cash and no way of spending it or hiding it for a rainy day, without giving the game away. The money needs cleaning, so you can ship it to a dodgy firm in an Offshore Financial Centre and they might help you convert it into bearer bonds, owned by a shell company that no one knows about. You could also use it to buy a bolt-hole in London or the South of France in case of a coup, maybe pay the kids' school fees or fund a great aunt's shopping trips to Paris.
Tax Evasion Vs Tax Avoidence
Of course everyone is allowed to avoid paying tax if they possibly and legally can. It is perfectly legitimate e.g. - UK has one of the most complex and rebust taxation system in the world but indeed the UK government encourages taxpayers - to save in a tax-free Individual Savings Account (Isa), for example.That means you do not pay any income tax on the interest you receive, or capital gains tax when you come to sell. There are also tax-saving advantages to putting money into a pension scheme, donating to charity via the gift aid scheme, or claiming capital allowances on things used for business purposes.
Another example could be by choosing a strucuture of payment within your own limited company, putting yoursleves as employee, paying a minimum wage upto your personal allowance and taking rest as dividends (There is less tax on dividends), it is tax avoidene cum tax planning.
But tax reliefs and rules are open to abuse. So every individual is required to declare their money from whatever source they have, and then it is upto Govt to assess whether tax avoidence in hide of tax planning used are allowed or disallowed.
Companies like Apple, Starbucks, Topman and many other are avoiding tax by registering in countries like Northern Ireland where Corporation tax rates are low as 12.5% as compared to US where it is probably upto 40%. So companies use laws and regulations in different countries for their tax advantage, same is case with individuals who does this with small companies.
Tax Evasion on the other side is illegal and criminal activity, and people pay fines, penalties and face imprisonment for doing this. a simple example could be ; if i am a Pakistani resident, i have put money in offshore structures and never declared income from these assets in my yearly tax returns, nor i ever paid taxes on them in my resident country than it is certainly a tax evasion. Here i am not doing tax avoidence but i am either hiding the source of funds invested or trying to evade tax (as i dont wana pay it)..
Issue in Pakistan
Imran Khan's offshore Company Setup.
First of all PTIs stance about offshore strucutures has been wrong by declaring all of these as illegal. Now as they sowed in their stance by declaring all offshore structures as illegal (Reffering to IK tweets), they are now going to reap it as IK had his own offshore investment company. So the leadership may end up in some embarassment & weaken its case against the govt.
However apart from their stance and looking at legal side of it, my view is that IK setup his company in the UK to buy his flat (as he was not permanent resident) and it was tax advantegous, specially if you have intention to sell this property in the future with the intention to move aborad. In this case and Capital Gains tax could be avoided in the year when you sell it and are non resident, however you would be required to declare these funds in you tax returns and in accordance with the rules of the countries where you are moving your funds too... However there are ways to borrow money from someone and move them as gift before the sale of such properties and in that case money coming in from abroad in Pakistan could be shown as income from gift scheme which doesnt attract any taxes (any Pakistani CA might correct me on on this point).
I don't see IK would have much problems with his taxes side (as he mentined he declared it and was paying taxes on it) and he has declared the property (Offshore strucutre was just used to buy this property) but he would pay a price in terms of satisfying his supporters about his previous stance... lets see what he has to say tomorrow in the parliament. He should bring copies of his, salary slips to show when and how money was saved, his tax returns to support these, give reason of why offshore company was set up for residential property and whether he evaded any tax in pakistan when he moved all this money and how was it shown... If he does that he would come clean.
Shariff' Family's offshore Company Setup.
Shariff family put themselves into trouble by giving different statements on different times... It looks like they had these properties since early 1990's (Don't want to go in details again as Media, Ch Nisaar and other oposition leaders have been discussing these by referring to videos and interview of shariff family), also it is backed by possession and repossession case of some of these properties in 1999 i believe. Issue with their offshore strucures as apposed to IKs seems to be a doubt of either tax evasion or money laundering issue. If i was close to PM, i would have suggested him to put forward his tax returns for 1990's to 2013 (Whether local, nil or forerign returns). Obviously his kids got money off him when they were teenager and build up these investment property companies... So effectively all they need is to show Trail of these funds (where did the millions of s come from), how were they transferred , why offshore structures and whether taxes were paid, and offcource their income tax returns. Bank statements, money transfer documents, and tax returns ... all is what is required. If they do that, they wouldn't need any comission and they would come clean if all that is shown clearly and proper taxes has been paid.. If they come out as they did so for tax planning, or tax avoidence they might not have issue again but the most important bit is declaration of these properties is must.
Leaked Documents
There are hundreds of companies in tax heavens. we have seen leaked documents from one company only, do you really think Malik RIaz, Zardari and others wouldnt have such properties, offcourse they have.. but they are hidden and there is no trace of em, unless such documents are leaked or world force countires like channel island, swis and panama to release details of ownerships of such companies...
Summary:
Please do not support PM or IK, just because you support their party, you are paid by Mariam' Nawaz social media team or whether you are paid by their opponents. Its a matter of our country.
If IK declares his returns in the parliament with full trail about source of this money then he would put more pressure on PM, however, he would still need clarifying his previous stance to his workers.
PM should come clean with his returns, (Not commissions), public will believe in the documents they are going to present.
I would like my fellow forum members for the sake of survival of our beloved country to have constructive debate on this thread and to make up your stance based on educated information and not merely based on your party affiliation..
Disclaimar: above should not be used as a tax advice :) and it solely written for discussion in siasat.pk by Patriotic Pakistani
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