KARACHI: Signatories to the OECD’s convention of international tax cooperation are bound to exchange customer data of entire financial sector, including banks, insurance firms and bourses in order to jointly check the incidences of tax evasion, officials said on Tuesday.
“The exchange of information about tax evasion with the international community will cover banks, stock exchanges and investment and insurance companies,” said an official at the Federal Board of Revenue (FBR).
In September last year, Pakistan signed the multilateral convention on mutual administrative assistance in tax matters of the Organization for Economic Cooperation and Development (OECD). The convention is the most powerful instrument for international tax cooperation. It provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers’ rights.
The sources said the FBR and other regulators, including the State Bank of Pakistan and Securities and Exchange Commission are finalising ‘common reporting rules’ for defining standards for exchanging information.
The sources said the regulators would finalise a comprehensive reporting regime under which not only banks but also other financial institutions would also provide details. The common reporting rules are similar to reporting standards defined under OECD guidelines, the sources added.
The international treaty is scheduled to be implemented from July 1 and the government has already amended tax laws to keep abreast of the international standards. The FBR sources said banks would not have difficulties in providing information of foreign nationals as they are already complying with the US law of Foreign Account Tax Compliance Act (FATCA). However, other financial institutions would initially face difficulties in compliance with the common reporting rules.
FATCA has been intended to increase transparency for the Internal Revenue Service with respect to US persons that may be investing and earning income through non-US institutions.
A tax official said the FBR has been struggling for many years to amend Income Tax Ordinance, 2001 and ‘The Protection of Economic Reform Act, 1992’ to apprehend those taking out untaxed money from Pakistan and bring back without questioning. The official said after the implementation of the treaty, OECD member countries would get information of those persons who repatriated or transferred amount.