LONDON: Money kept by Pakistani nationals and enterprises in Swiss banks fell by 33 percent to a record low of CHF380 million (Rs63 billion) in 2018, falling below the level of Indian funds for the first time in four years, according to Swiss National Bank’s annual statistics report released on Thursday.
The Pakistani money in Swiss banks had fallen by over 20 percent in 2017 (to CHF1,115 million) and by 6 percent in 2016. Before that in 2015, these funds had risen 16 percent.
The report also signals the first time in four years that Pakistan has been surpassed by its neighbour India, which accounted for over CHF572 million (Rs95 billion). Nothing in the report suggested that the funds are from illegitimate sources. It may be interesting to note that the official figures disclosed by the SNB do not include the money that the foreign clients of Swiss banks might have kept in the name of shell companies.
This will ensure that financial information on bank accounts held by Pakistani citizens in Switzerland and vice-versa will be shared annually on an automatic basis. It is expected that both countries will begin collecting banking data from 2020 and exchange information on an annual basis from 2021.
India media reported that India has already started the automatic exchange of banking information with Switzerland. Switzerland first signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in 2014. The Swiss parliament approved the deal in 2015, the treaty was ratified in 2016, and it came into effect on January 1, 2017.
A number of other major countries also saw their funds falling in Swiss banks amid a global clampdown against the banking secrecy walls in the Alpine nation. In March 2017, former finance minister Ishaq Dar announced that Pakistan signed a new treaty with Switzerland to pave way for the exchange of information on the undeclared wealth stashed in Swiss banks. He said that the Avoidance of Double Taxation treaty with Swiss had been signed after three years of negotiations and that the new treaty will enable the country to get information about undeclared money stashed in Swiss banks by Pakistanis.
Switzerland had earlier attached four demands as prerequisites for signing this treaty, requesting Pakistan to grant the Most Favoured Nation (MFN) status to Switzerland in respect of lowering tax rates on interest, royalty, shipping, and reduction in the tax exemption limit — from 18,000 Swiss francs to 14,500 francs — on Pakistani nationals, including students living in Switzerland. Pakistan refused the request but both countries then signed the treaty unconditionally.
Pakistan started in January 2014 the process of becoming a member of the Multilateral Convention on Tax Matters with the Organisation for Economic Cooperation and Development (OECD). Pakistan was granted a membership of the OECD in September 2016, making the country 104th member of the OECD.