ISLAMABAD: Pakistan will start receiving information by early 2018 under the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, said Finance Minister Ishaq Dar Wednesday, terming it the most powerful global treaty to curb tax evasion.
Dar’s comments came amid concerns expressed by international and local experts over the real effectiveness of global information exchange treaties, which they feared would not serve the intended purpose due to various lacunas.
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Dar was speaking at a seminar organised by the Federal Board of Revenue (FBR) to highlight the importance of Organization for Economic Cooperation and Development’s (OECD) convention.
The federal government on Friday would approve the instrument of ratification of the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, said Dar. The ratification is the next step after Pakistan signed the treaty on September 14.
Dar also ‘advised’ the tax consultants to stop advising people to park their money abroad but hastily added that Pakistani laws allow placement of money abroad. He vowed to amend the laws that are facilitating stashing wealth abroad.
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The government is facing a gigantic task to bring back billions of dollars stashed in offshore havens like Panama, Bahamas and Switzerland after media leaks named over 600 Pakistanis owning offshore companies.
The OECD convention is the most powerful global treaty on curbing tax evasion, even powerful than bilateral arrangements, said the finance minister. He said that Pakistan would start receiving the information by either the end 2017 or early 2018.
The federal cabinet has already given approval of the treaty and its ratification will now be required before Pakistan becomes an active beneficiary of the convention.
However, experts have also started expressing concerns over the effectiveness of these treaties due to right of the countries to refuse to provide any information and existence of over three dozen offshore tax havens that are not signatories.
The major countries of the western world have clearly started to focus on other means of obtaining data because Tax Information Exchange Agreements (TIEAs) in practice do not work, according to an article published in International Taxation journal in April this year.
The authors argued that the OECD scored an embarrassing own goal by allowing secrecy jurisdictions to sign up TIEAs with other secrecy jurisdictions, reducing the prospects of sharing any meaningful information.
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Pakistan became the 104th member of the OECD convention aimed at tackling tax evasion and avoidance.
Under article 30 of the OECD convention, every country has a right to exclude certain information and the FBR is also working on these exclusions, said Masoud Naqvi, a senior tax consultant and Chairman of the government’s Tax Reforms Commission. He said that the other main issue was exclusion of secrecy jurisdictions. Naqvi also highlighted lack of preparedness of financial institutions to comply with the requirements of the OECD.
Dar did acknowledge the issue of existence of tax havens but said that the OECD was working to address this issue as well.
He said that Pakistan has also initialled an agreement with Switzerland on avoidance of double taxation treaty. He said that Switzerland had sought major tax concessions but Pakistan did not accept any of its demand.
Dar also showed desire to sign the OECD treaty on anti-bribery – an issue that he also highlighted with the OECD Secretary General during his visit to Paris this month.
FBR Chairman Nisar Mohammad Khan said that the tax authorities have launched a pilot project of OECD convention in collaboration with the UK tax authorities aimed at putting in place apparatus to receive and share information with the OECD member countries.
He said that UK’s tax officials would visit Pakistan in November this year for on-site inspections followed by visits of the OECD Secretariat officials in January next year.
The OECD Convention would also facilitate Pakistan to obtain information from other member countries through exchange of information on request, spontaneous exchange of information and automatic exchange of information.
Courtesy : Express Tribune