Tax convention

While the government and opposition finally agreed to some common ground on the Panama Papers probe, the government took another step in the right direction by deciding to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCMAATM). The 98-member convention allows any country to check tax evasion by any of its nationals living in any of the member countries. It allows Pakistan access to information on the wealth of its citizens in a number of countries, which includes the US. The development, in principle, is a positive one. Finance Minister Ishaq Dar is likely to sign the agreement in Paris in October this year. In the face of public pressure to clamp down on tax evasion by the rich and powerful in Pakistan, the convention will mandate cooperation between member states over any individuals being investigated over tax-related issues.

The trouble is that signing the convention does not offer transparency in the crucial matter of offshore companies as yet. This means that, in principle, any wealth held through offshore companies would still remain out of the purview of the Pakistani state. While Panama seems to have bowed to international pressure to ink the convention, the timeline for when it would implement such a decision is unclear. More controversy has also been generated by a number of countries who have signed the agreement who still do not share the relevant wealth data of individuals when asked. In the long run, Pakistan has made the correct choice of joining the most comprehensive global convention on tax evasion. In the short term, this is unlikely to offer any solace to those hoping for a swift and quick end to the Panama Papers leaks controversy.

Shahzad Siddiqui

Karachi