Pakistan can access 15 years data of offshore accounts

The Federal Board of Revenue (FBR) will now be able to obtain the data of offshore bank accounts of Pakistani nationals for the last 15 years under the international tax treaty that it signed with the Organization for Economic Cooperation and Development (OECD), officials said on Saturday.

“The signatories of OECD convention on tax matters are obliged to provide last 15 years data of transactions,” a senior official said on the condition of anonymity.

At present, under domestic laws, taxpayers’ data of last 10 years could be examined, the official said, adding: “The domestic law will be amended to comply with the convention.”

Pakistan on September 14 signed Multilateral Convention on Mutual Administrative Assistance in Tax Matters at OECD Headquarters in Paris and becomes the 104th jurisdiction to join the convention.

The official said that the convention would help the FBR exchange information in three ways, which included exchange of information on request, spontaneous exchange and automatic exchange.

The treaty would be enforced after ratification and it would take about a year, which is a normal practice, the official said.

A cell had already been established at the FBR Headquarters for exchange of information. It will coordinate with the local tax bodies for accessing information from signatory countries, the official added.

Pakistan for the last many years is facing difficulties in obtaining records from Swiss banks regarding accounts maintained by Pakistanis.

The officials said that Switzerland is also trying to sign the treaty. “In case Switzerland becomes signatory of the treaty, it will help the FBR access information directly from the Swiss banks,” the official added.

The basic purpose of the convention is to combat offshore tax evasion through mutual administrative assistance with other parties to the convention.

The official said that many foreign companies operating in Pakistan and many Pakistani nationals operating abroad were found involved in dodging the tax authorities.

“The convention provides complete solution to detect such evasions,” the official said.

The official also added that the convention is not only a tool for fighting tax evasion, but it could also be used for other purposes such as fighting corruption and money laundering.

Another significance of the treaty is that the FBR official can go abroad and examine tax records of a person, the official said.

However, tax experts said Pakistani authorities are not fully prepared to comply with the treaty.

“It is not a multilateral convention in its true spirit, as member countries are governed by their domestic laws,” Dr Ikramul Haq, advocate Supreme Court, said.

He said that the availability of information would depend upon the domestic banking laws of each member country.

“We have a poor record of getting information from banks. Even after insertion of section 165A, the FBR has failed to obtain information from banks,” he added.

Dr Ikram questioned that if the FBR cannot get information from local banks, how will it exchange information with the foreign banks?

“How in the presence of laws such as Protection of Economic Reforms Act 1992 and Section 111 (4) of the Income Tax Ordinance 2001, any crackdown will be possible within Pakistan?” He asked.