Pakistanis hold $19bn in offshore wealth, with half invested in Dubai’s real estate

Pakistanis hold $19bn in offshore wealth, with half invested in Dubai’s real estate

24 October 2023, Pakistan Today Profit

A recent Global Tax Evasion report, produced by the EU Observatory, highlights that Pakistanis own approximately $19 billion in offshore wealth, with over half of it invested in Dubai’s real estate. The report also calls for a minimum 2% income tax on the world’s billionaires to increase their current income tax contributions.

According to the report, Pakistanis hold approximately $19.2 billion in offshore assets, of which $8 billion is in cash, shares, bonds, and investments, while an additional $11.2 billion is invested in real estate. This figure accounts for 3.6% of Pakistan’s GDP in 2022.

The report notes that Asian tax havens hold the majority of these assets, with $4 billion, followed by $2 billion in European tax havens, $1 billion in Switzerland, and $910 million in American tax havens. This represents a decrease of $1.1 billion in offshore wealth owned by Pakistanis compared to the previous year, primarily due to reductions in assets held in Asian tax havens.

The report suggests a shift in preferences over time, as Pakistanis have historically held substantial wealth in Switzerland. In 2007, Pakistanis held as much as $19 billion in Swiss assets, which, by 2016, had decreased to just $2 billion. This shift in wealth destinations appears to coincide with significant political changes in Pakistan following the Panama leaks.

One notable highlight is the ownership of $11.2 billion in real estate in three global cities—Dubai, London, and Singapore. The majority of this real estate investment, approximately $10 billion, is located exclusively in Dubai, with significantly smaller investments in London ($740 million) and Singapore ($120 million). Paris holds just $18 million in assets owned by Pakistanis.

The report underscores the use of offshore real estate as property owned by individuals residing in different countries or held through complex offshore structures that obscure the owner’s identity.

The EU Observatory conducted the report with the collaboration of over 100 researchers worldwide and tax administrations. The report’s research indicates that global billionaires have low personal effective tax rates, ranging from 0% to 0.5% of their wealth.

In response to these findings, the EU Observatory recommends the introduction of a minimum 2% income tax on billionaires worldwide, with the aim of increasing their tax contributions. The report asserts that this measure could generate up to $250 billion in annual revenues from the less than 3,000 billionaires who collectively possess $13 trillion in wealth but contributed just $44 billion in personal taxes in the previous year.

Furthermore, the report discusses the revenue losses incurred by Pakistan and other nations due to profit shifting by multinational companies. In Pakistan’s case, the loss of revenue from such activities amounted to $430 million in 2020, with the majority, $310 million, attributed to profit shifting to non-EU tax havens. This figure was $540 million in 2019.

The report also proposes a strengthening of the global minimum tax on multinational companies, free from loopholes, which could generate an additional $250 billion annually. These funds could be instrumental in addressing the challenges posed by climate change, which developing countries are grappling with.

The report concludes by recognizing the ongoing problem of tax evasion, with approximately $1 trillion in profits still being shifted to tax havens in 2022. To combat this issue, it suggests reforms to the international agreement on minimum corporate taxation, advocating for a 25% rate and the elimination of loopholes that encourage tax competition. It also calls for institutional mechanisms to tax wealthy individuals who move to low-tax jurisdictions.

The report recommends unilateral measures in case global agreements fail and proposes the creation of a Global Asset Registry to enhance efforts in combating tax evasion.



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