To track the offshore tax-evaded cash outflows, Finance Minister Ishaq Dar has announced reaching an official agreement with the Swiss authorities. The two countries will exchange information regarding bank accounts on 21st March this year. It is significant to keep in mind that Switzerland is known for its strictest banking laws when it comes to secrecy.
Dar clarified that this decision is based upon the reports of a huge sum of deposits worth $180-$200 billion stored in the Swiss accounts from Pakistan.
Dar stated while announcing the policy:
“The Swiss government offered to sign such an agreement with Pakistan in the third quarter of the current month. It will enable us to exchange information on tax-evaded money”
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He also said that due to the ongoing news circulation regarding the Panama case, there has been a dire need to clarify this issue, to contact the Swiss government and ask to establish an arrangement for information exchange.
The entire process began in 2013; when the minister requested the Finance Ministry to alter the 2005 treaty on avoiding double taxation. The minister asked them to specially change a clause in the previous treaty that required minimum exchange of income tax information. Based on this proposal, the Federal Cabinet gave a green signal to the Finance Ministry to establish a new agreement with the Swiss government.
Dar revealed that initially there have been some hiccups as the Swiss government was inclined to put some strict conditions in the agreement including reduced tax rates, demanding a status of most-favored nation (MFN), and reducing bank account limits of students’ to $14,500 versus $18,000 currently.
Nonetheless, he said that, Pakistan continued to make its case with Swiss officials and requested them to relax their conditions.
Dar explained:
“Therefore after an understanding that now Pakistan will automatically get this information, they have also offered us a new agreement; and I shall be going there to sign this agreement on March 21 this year”
Pakistan became 104th member of OECD last year
Last year, Pakistan became the 104th member of Organization of Economic Cooperation (OECD). This is a global platform for exchanging information of offshore accounts and investments.
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Becoming a member of OECD convention on Mutual Assistance in tax related issues made it easier for Pakistan to establish an agreement regarding offshore accounts. The Finance Minister emphasized that the ongoing cases on Panama papers have made it necessary to take this initiative further.
Source: Radio Pakistan