IN THE SUPREME COURT OF PAKISTAN 
      (Original Jurisdiction) 
 
 
PRESENT:  
MR. JUSTICE MIAN SAQIB NISAR, HCJ 
MR. JUSTICE UMAR ATA BANDIAL 
MR. JUSTICE IJAZ UL AHSAN 
 
 
SUO MOTU CASE NO.2 OF 2018 AND 
CONSTITUTION PETITION NO.72 OF 2011 
 
 
S.M.C.2/2018: 
Suo motu action regarding maintaining of 
Foreign 
Currency 
Accounts 
by 
Pakistani 
Citizens without disclosing the same/paying 
taxes 
 
 
 
Const.P.72/2011: Senator 
Muhammad 
Ali 
Durrani 
Vs. 
Government of Pakistan and others 
 
 
In attendance: 
Syed Nayyar Abbas Rizvi, Addl. A.G.P. 
 
Mr. Muhammad Ali Durrani, petitioner 
(In Const.P.72/2011) 
 
Mr. Tariq Mehmood Bajwa, Governor, State 
Bank of Pakistan  
Mr. Tariq Mehmood Pasha, Chairman FBR 
Mr. Arif Ahmed Khan, Federal Secretary 
Finance 
Mr. Bashir Ahmed Memon, D.G. FIA 
Dr. M. Rizwan, Director Immigration FIA 
Dr. Usman Anwar, Director FIA 
Mr. Ali Sher Jakhrani, Director Law FIA 
Mr. Imran Ahmed Khan, Sr. Joint Secy. M/o 
Finance 
Mr. Fazal Mehmood, Director, State Bank 
of Pakistan  
Mr. Sanaullah Gondal, Deputy Legal Advisor, 
Mr. Zahid Khokhar, Member Customs, FBR, 
Dr. Iftikhar Ahmed, Director Law, FBR, 
Mr. Mehmood Mandviwala, ASC, 
Syed Shabbar Zaidi, Sr. Partner, A.F. Ferguson 
& Co., 
On Court’s Call: 
                          
Ch. Aitzaz Ahsan, Sr. ASC  
Mr. Hamid Khan, Sr. ASC 
SMC NO.2 OF 2018 ETC. 
-: 2 :-
 
 
Date of hearing: 
 
12.6.2018 
 
     ORDER 
 
  
By order of the Court dated 26.03.2018, a 
Committee of 12 Experts (“Committee”) having insight into 
the process of accumulation of undeclared foreign movable 
and immovable assets by Pakistani citizens was appointed by 
this 
Court. 
They 
were 
tasked 
with 
deliberating 
and 
recommending legislative and executive measures for tracing 
and retrieving such assets held abroad. The members of the 
Committee are named below: 
1. 
Mr. Tariq Bajwa, Governor, State Bank of Pakistan. 
2. 
Mr. Arif Ahmed Khan, Secretary, Finance Division.  
3. 
Mr. Tariq Pasha, Chairman, Federal Board of Revenue.  
4. 
Mr. Khalid Anwer, Sr. ASC. 
 
    5. 
Mr. Mehmood Mandviwalla, Barrister at Law, Senior 
Partner Mandviwalla and Zafar. 
 
 
6. 
Dr. Ikramul Haq, ASC and Partner Huzaima and Ikram. 
 
    7. 
Mr. Muhammad Waqar Rana, Additional Attorney General. 
 
    8. 
Syed Shabbar Zaidi, Senior Partner, AF Ferguson and Co. 
 
 
9. 
Mr. Bashir Ali Muhammad, Business Leader. 
 
 
10. Mr. Tariq Paracha, Business Leader. 
 
 
11. Mr. Atif Bajwa, Senior Banker. 
 
 
12. Mr. Nisar Muhammad Khan, Former Chairman, FBR. 
 
 
2. 
  
A final report of the Committee was submitted on 
13.04.2018 to the Court. During the course of hearing before 
us today, the Governor State Bank of Pakistan explained the 
Terms of Reference of the Committee. These primarily revolve 
around the object expressed in item No.II thereof as follows:  
“II. Examine 
existing 
legal 
regime 
and 
practices 
(especially 
related 
to 
foreign 
exchange and taxation), bilateral treaties 
and multilateral conventions that can be 
used to stem the unregulated outflow of 
foreign 
exchange 
from 
Pakistan, 
trace 
undeclared assets held abroad by Pakistani 
SMC NO.2 OF 2018 ETC. 
-: 3 :-
citizens and retrieve such assets especially 
the ones generated with proceeds of crime.”    
 
3. 
  
The Terms of Reference accordingly invite the 
identification of the administrative actions and amendments 
in the legislative framework that are necessary for achieving 
the purpose and object reproduced above. In the first 
instance, the Committee delineated ten factors that have 
caused substantial foreign exchange outflows from Pakistan 
for creating liquid, movable or immovable assets in foreign 
jurisdictions. Briefly these are: 
 
1. 
Cash feeding of foreign currency accounts and the 
immunity of such transactions under the provision of the 
Protection of Economic Reforms Act, 1992 (“PERA”) from 
scrutiny of the source and the movement of funds deposited 
in foreign currency accounts. 
 
 
2. 
Free cash movement of foreign currency of any amount 
within and out of Pakistan under, PERA without check or 
scrutiny; thereby assisting its smuggling to foreign 
jurisdictions.         
 
 
3. 
Misuse of retained foreign exchange by exporters. Laxity in 
the regulatory framework for the retained portion of export 
proceeds has facilitated its leakage and the accumulation of 
undeclared assets abroad.  
 
 
4.  
Under invoicing and over-invoicing in foreign trade 
transactions. The weaknesses of the information and 
regulatory systems for the valuation of goods/services by 
the FBR and the SBP have fostered unauthorized retention 
of foreign exchange abroad. 
 
 
5. 
Section 111(4)(a) of the Income Tax Ordinance, 2001 
provided an opportunity for misuse of the immunity to 
inward remittances brought through normal banking 
channels; as such black money stashed abroad could be  
whitened without payment of tax.  
 
 
6. 
The Hundi and Hawala means of foreign currency transfers 
have remained available in the market as illegal channels 
for transfer of ill-gotten or tax evaded funds.  
 
 
7. 
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.  
 
 
8. 
Scant bilateral tax treaties with other countries for mutual 
cooperation and exchange of information have hampered 
detection of foreign assets accumulated by citizen.  
SMC NO.2 OF 2018 ETC. 
-: 4 :-
 
 
9. 
Lacunae in tax laws and regulations have enabled 
avoidance of tax on technical grounds. These lacunae 
include vague or insufficient definition of key concepts like 
“resident”, 
“non-resident”, 
“foreign 
company”, 
“trust”, 
“settlor” and “beneficiary” of a trust.   
 
 
10. 
Failure of the present income and wealth tax declaration 
forms to require disclosure of foreign assets and income of 
citizen.   
 
 
4. 
  
Recommendations 
have 
been 
made 
by 
the 
Committee to deal with the said deficiencies in foreign 
exchange regulation and tax collection. The recommendations 
note the experience of incentive schemes floated in other 
jurisdictions to encourage voluntary disclosure of foreign 
assets. These include schemes initiated in the recent past in 
Italy, India and Indonesia. It is stated that the Tax Amnesty 
Scheme, 2016 offered in Indonesia was highly successful and 
the Committee supported its emulation in Pakistan.  
5. 
  
The Committee’s report has highlighted that 
during the financial year 2016-17 a staggering amount, 
US$15.253 billion, was transferred abroad by individual 
account holders in Pakistan through normal banking 
channels. It is also suggested that during the said period a 
substantial amount of transfers took place from Pakistan 
under unauthorized and undocumented Hundi and Hawala 
mechanisms. Clearly, both types of outflows have a huge 
impact on the stability of the foreign exchange reserves of the 
country and adversely affect the exchange rates of the 
Pakistani Rupee. Also as a result, the national economy can 
become vulnerable to pressure due to foreign currency 
obligations of the State; can suffer undue and disruptive 
SMC NO.2 OF 2018 ETC. 
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inflation and can drain the exchequer of substantial amounts 
of tax on account of escaped income and wealth.  
6. 
  
In the above circumstances, the Committee has 
recommended that a scheme for voluntary disclosure of 
foreign assets owned by Pakistani citizens be announced by 
the Federal Government. This would provide such declarants   
with an opportunity to declare and/or transfer their foreign 
assets to Pakistan in lieu of payment of tax. In this regard, we 
were informed that after our order dated 26.03.2018, the 
Federal Government had promulgated the Foreign Assets 
(Declaration 
and 
Repatriation) 
Ordinance, 
2018. 
The 
Committee has impliedly supported its provisions.  
7. 
  
Before us today, several Committee members have 
reiterated their support for the voluntary disclosure scheme 
announced by the Federal Government. This scheme has in 
May, 2018 been re-enacted as the Foreign Assets (Declaration 
and Repatriation) Act, 2018. (“Act, 2018”). The significant 
feature of the Act, 2018 is the promised immunity from 
taxation and penal action in respect of undeclared foreign 
assets subject to payment of tax at the following rates: 
1. Liquid foreign assets that are not repatriated, 5% of 
the value of the foreign assets. 
2. Immovable assets outside Pakistan, 3% of the value 
of foreign assets. 
3. Liquid assets repatriated and invested in Pakistan 
government securities, 2% of the value of the foreign 
assets. 
4. Liquid assets repatriated to Pakistan, 2% of the value 
of the foreign assets.  
 
SMC NO.2 OF 2018 ETC. 
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8. 
  
It is also informed that the government has made 
legislative amendments in the relevant laws for curtailing and 
regulating the cash feeding of foreign currency accounts by 
restricting that privilege to tax filers only. A regulatory check 
in cash movement of foreign currency above US$100,000/- 
within Pakistan has been imposed. Likewise, immunity from 
taxation of inward remittances under Section 111(4)(a) of the 
Income Tax Ordinance, 2001 has been limited to a maximum 
US$100,000/- per annum. It is acknowledged by the 
Governor State Bank and the Members of the Committee 
present in Court today that these Suo Motu proceedings have 
encouraged the review by the Federal Government of its policy 
on the subject leading to the above mentioned legislative and 
regulatory changes. With respect to the remaining factors 
identified by the Committee for unauthorized foreign currency 
outflows from Pakistan, we are informed that no legislative or 
regulatory provisions have so far been made by the Federal 
Government.  
9. 
  
This Court is not an expert in economic, fiscal or 
financial matters. It was persuaded to initiate these Suo Motu 
proceedings for the grave public interest concerns: firstly, 
regarding the declining foreign exchange reserves of the 
country, the depreciating exchange rate of the Rupee and the 
corresponding 
inflationary 
trend 
of 
imported 
essential 
commodities; and secondly, by the governmental indifference 
towards the unhindered outflows of valuable foreign exchange 
from the economic wealth and resources of the country 
SMC NO.2 OF 2018 ETC. 
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encouraged by immunities from scrutiny and from taxation 
granted to foreign currency transfers abroad that were also 
depriving the exchequer of vital tax revenue.  
10.   
Accordingly, these proceedings have aimed to 
draw the attention of the Federal legislative and regulatory 
bodies toward the key issues pertaining to the aforementioned 
matters of national priority. The fact that the Federal 
Government has brought legislation on the subject is a good 
start to curtail misuse of privileges granted by the law and 
executive regulation. No challenge to the provisions of the 
different legislative and regulatory initiatives undertaken in 
the matter by the government is presently before the Court. 
Also we are not prescient about subtle technicalities of foreign 
exchange and balance of payment stabilization nor about 
fiscal or other economic matters so as to anticipate 
deficiencies in the Federal Government’s actions. Likewise, in 
the absence of a concrete challenge, the Court is not inclined 
to unilaterally sit in academic judgment on the legality or 
propriety of the provisions of the scheme of voluntary 
disclosure of foreign assets under the Act, 2018.  
11.   
Having said that, it is observed that any measures 
taken by the Federal Government in the public interest to 
protect the foreign exchange reserves of the country and to 
bring the hitherto undeclared foreign assets within the tax net 
are welcomed by the Court. Nevertheless, there are other 
deficiencies of the current tax laws and in the regulatory 
framework for the holding and transfer of foreign exchange 
SMC NO.2 OF 2018 ETC. 
-: 8 :-
that promote the accumulation of undeclared foreign assets 
and corresponding income. These have been highlighted by 
the Committee but remain unaddressed by the Federal 
Government. They require careful attention and deliberation 
by the concerned authorities. Let the Federal Government, 
FBR and the State Bank of Pakistan state their respective 
positions about these matters pointed out by the Committee 
and indicate if any reform is proposed to correct or remedy 
the same.  
 12.   
Relist after one month at the Principal seat of this 
Court.  
 
         
       
 
 
 
Chief Justice 
 
 
 
 
Judge 
 
 
 
 
Judge 
Lahore 
12.06.2018 
Naseer  
