Pakistani Tax Evaders Bring Money Back

by Mary Swire, Tax-News.com, Hong Kong

08 October 2001

It has been revealed that despite gloomy predictions of large scale capital flight from Pakistan following the decision to back the US led war on terrorism, the exact opposite has occurred, and the Pakistan rupee, previously one of the world's weakest currencies, has appreciated by almost 6% since September 11th.

Some puzzled economists see this latest development as 'counter-intuitive', and point to the fact that the rupee had depreciated by almost 30% over the preceding 12 months. Others, however, feel that the inflows have probably come about as a result of the steadily improving situation in Pakistan due to General Pervez Musharraf's support of US action against Osama Bin Laden and the Taliban.

The country's money changers, however, have another explanation. They believe that Pakistan's now rallying economy has been created by the large scale repatriation of previously undeclared funds, squirreled away overseas by Pakistani citizens for the purposes of tax evasion.

'There are a lot of Pakistan nationals who have avoided taxes, or under-invoiced their export earnings, or been on some other fiddle and they are terrified that the worldwide search for terrorist money will also expose them,' Sakib Sherani, ABN Amro's chief economist for Pakistan explained. Current estimates suggest that Pakistani nationals hold between $40 billion and $60 billion in overseas financial assets, although only a very tiny fraction of this is thought to have any connection with organisations likely to have their assets frozen in the hunt for terrorist money.

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