Swiss accounts of Rs81 trillion no more secret

Pak-Swiss accord to avoid double taxation signed

ISLAMABAD: The accounts in Swiss banks containing Rs81 trillion of Pakistanis would no more be secret now as Pakistan and Switzerland on Tuesday signed the much-awaited revised agreement on avoidance of double taxation as exchange of information would enable Islamabad to get details about those who had stashed billions of dollars untaxed money in the Swiss bank accounts.

However, many critics say that the delay in signing of revised agreement might have helped those who had parked their money and now they might have withdrawn their dirty money from the Swiss banks as the FBR was making efforts to arrive at this agreement for the last two years.

FBR’s Spokesman Dr Iqbal, while talking to The News on Tuesday, dispelled the impression of withdrawal of money from the Swiss bank accounts and said that nothing of this sort had happened. “Now we will be able to get the desired information within one month period about specific cases which will be generated from our field offices,” he said.

According to an announcement of Finance Ministry, Pakistan and Switzerland here on Tuesday signed the revised Avoidance of Double Taxation Agreement (ADTA) with respect to taxes on income. The agreement was signed by the Ambassador of Switzerland Marc George and Chairman, Federal Board of Revenue (FBR), Dr Muhammad Irshad.

The signing ceremony was witnessed by Federal Minister for Finance Senator Muhammad Ishaq Dar, Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan, other officials from the Embassy of Switzerland. Officials from the Ministry of Finance and FBR were also present on the occasion.

The revised ADTA between Pakistan and Switzerland will open new vistas for cooperation, especially in the areas of exchange of information for tax purposes. It contains improvements with regard to the taxation of service fee and capital gains resulting from the sale of qualifying participants. These rules promote economic exchange in bilateral relations. The agreement also contains an arbitration clause, which should guarantee the avoidance of double taxation.

One of the highlights of the renegotiated treaty is the replacement of the Article on “Exchange of Information” with the new one reflecting the internationally-accepted standard, which is based on the model of Organisation for Economic Cooperation and Development (OECD). The new Article on Exchange of Information will considerably expand the existing scope of information to be obtained on request basis for the enforcement of domestic tax laws. It will also provide access to bank information for tax purposes and such information shall not be refused solely because the information is held by a bank or other financial institution. For this purpose, the requesting state will be providing information to the requested state such as the identity of the person under investigation and period of time for which the information is requested.

The existing ADTA between Pakistan and Switzerland was signed in 2005, and enforced in 2008. However, subsequent to the federal cabinet approval in August 2013, Pakistan approached Switzerland for incorporating the updated version of the Article on Exchange of Information based on the OECD model. In August, 2014, a Pakistan delegation visited Switzerland for renegotiation of Pak-Swiss Treaty and initialed the draft agreement between the two countries. However, in order to safeguard the national interests and to bring certain provisions of the initialed agreement in line with Pakistan’s tax policy, Switzerland was requested for a second round of negotiations, which was finally agreed in May, 2016 and held in Berne, Switzerland, in June, 2016. The negotiations were held in a very cordial and friendly atmosphere and all the issues were amicably resolved.

It may be recalled that the Swiss government had invited the finance minister to sign the agreement with the Head of the Federal Department of Finance (FDF) of Switzerland, and had proposed the signing to be held on 21st March 2017 in Berne. However, owing to unforeseen commitments of the Head of FDF, the Swiss government informed the government of Pakistan that it could no longer proceed with the signing in Berne on 21st March, 2017. In the interest of avoiding any delay in the signing of the agreement, the Government of Pakistan proposed that the signing might be held in Islamabad on 21st March, 2017. The Swiss government acceded to this proposal and authorised the ambassador in Islamabad to sign the agreement, while the prime minister of Pakistan issued the instrument of full powers to the FBR chairman to sign the agreement. The Swiss government had also proposed a meeting between the finance minister of Pakistan and the head of FDF of Switzerland on the sidelines of the upcoming Spring meetings of the World Bank Group and the IMF on 21–23 April 2017. The Government of Pakistan agreed to the proposed meeting.

After signing, both the states will undertake internal procedures for ratification of the agreement. After exchange of instruments of ratification, the agreement will come into force in Pakistan on first July of the next calendar, the finance ministry concluded.