Dar to sign OECD’s accord on tax matters on Sept 14

ISLAMABAD: Federal Minister for Finance Ishaq Dar is going to sign OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters next week (September 14) at Paris, enabling Islamabad to get exchange of information from 103 countries such as from all G-20 countries for getting information on banking details on reciprocal basis for enforcement of tax laws.

This exchange of information will help Pakistan to seek information related to multibillion dollars stashed dirty untaxed money of Pakistanis into countries known as tax havens. 

India had already signed Organisation for Economic Cooperation and Development (OECD) Multilateral Convention on Tax Matters but Pakistan would not lag behind as it would become operational for all member states by end of 2017.  When contacted to Minister for Finance Ishaq Dar for seeking his views on India’s signing of this convention ahead of Pakistan on Tuesday, he confirmed that Pakistan would get benefits from this OCED’s convention simultaneously along with all other member countries including India as it would become fully operation for all by end of 2017.

According to the details gathered by “The News” through obtaining official documents from the FBR which states that through the Multilateral Convention, Pakistan shall be able to exchange information, including information on banking details, on reciprocal basis with other partner countries which is foreseeable relevant for the administration or enforcement of its tax laws. 

As the text of Multilateral Convention suggests, Pakistan and other participating countries shall be facilitated in the following three strands of exchange of information:

Exchange of Information on Request: The requested State shall provide any information concerning particular persons or transactions to the requesting state which is foreseeably relevant for the administration or enforcement of their tax laws. 

Spontaneous Exchange of Information: The parties to the Convention shall on reciprocal basis, without prior request, forward each other information of which it has knowledge that there may be a  loss of tax in the other country; or would give rise to an increase in tax liability in that country. 

Automatic Exchange of Information: The parties shall automatically exchange information that is relevant for administration or enforcement of their domestic tax laws. As such, Pakistan will be able to receive information in few years time, on automatic and on annual basis, on the banking and other details of its nationals and tax residents from other parties of the Convention.

The Multilateral Convention shall further facilitate its participating countries in the following areas: Simultaneous Tax Examinations, which shall provide an arrangement between two or more parties to examine simultaneously, each in its own territory, the tax affairs of a person or persons in which they have a common or related interest, with a view to exchanging any relevant information which they so obtain.

Tax Examinations Abroad which provides that based on request, the requested State may allow representatives of the applicant State to be present at the appropriate part of a tax examination in the requested State.

Assistance in Recovery of Tax Claims: At the request of Pakistan, the requested State shall take the necessary steps to recover tax claims of the first-mentioned State as if they were its own tax claims.

Service of documents: Based on request, the requested State shall serve upon the addressee documents, including those relating to judicial decisions, which emanate from the applicant State and which relate to a tax covered by the Convention.

It is relevant to mention that the automatic exchange of information through the Multilateral Convention has not yet been initiated in any country and the participating countries have committed to such exchanges in 2017 and 2018, respectively. 

For the effective automatic exchange of information, efforts are underway to put the necessary legal, administrative and IT apparatus in place. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters is a joint initiative of Council of Europe and the OECD. 

It is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance, particularly through efficient exchange of information amongst its member countries. 

There are 103 countries and jurisdictions which currently participate in the Convention, including all Group of 20 (G20) countries, all Organisation for Economic Cooperation and Development (OECD) countries and an increasing number of developing countries.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters shall facilitate Pakistan in the areas of international cooperation for better operation of our domestic tax laws. 

This cooperation will range from assessment to collection of taxes. The federal cabinet has already approved the summary submitted by Revenue Division/FBR for signing the Multilateral Convention on 20th January, 2014. 

Subsequently, Pakistan sent a request to the OECD Secretariat through the Minister for Finance & Revenue Ishaq Dar, expressing its strong interest in becoming signatory and party to the Multilateral Convention.

The Pakistan request was forwarded to the Coordinating Body (CB) of the Multilateral Convention. Since then, Pakistan made consistent efforts to obtain approval of the Coordinating Body to become party to the Convention. 

These efforts include necessary amendments in tax laws, particularly with reference to confidentiality provisions, membership of the Global Forum on Transparency and Exchange of Information and its Peer Reviews. 

Pakistan has now been rated by the Global Forum as largely compliant jurisdiction on matters relating to transparency and exchange of information for tax purposes. Subsequent to the amendments in tax laws and the successful peer review of Pakistan, the OECD has now invited Pakistan to become party to the Multilateral Convention.

When The News sought comments of Finance Minister Ishaq Dar, he said that in its meeting held on 31st August 2016, the federal cabinet, in view of its earlier decision dated 20th January, 2014, authorised him (Minister for Finance and Revenue) to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the OECD Secretariat, Paris. 

Accordingly, he said that now the prime minister has signed the instrument of full powers authorising him to sign the Multilateral Convention on behalf of the government of Pakistan.

He concluded that he would now sign the Multilateral Convention on 14th September 2016 at the OECD Secretariat in Paris in the presence of Secretary General OECD.