GENEVA: The proposed Article 26 (exchange of information) of the convention on Avoidance of Double Taxation, being renegotiated between Pakistan and Switzerland, would bound the Swiss tax authorities to exchange all requested information, including confidential bank account information of Pakistanis maintaining Swiss accounts. Sources told Business Recorder here on Tuesday that Pakistan and Switzerland signed Convention on Avoidance of Double Taxation in 2005 which was enforced in 2008.
This agreement contained old version of Article 26 on Exchange of Information. In 2010, Switzerland agreed to adopt latest version of Article 26 of the OECD Model Tax Convection in its Agreements on Avoidance of Double Taxation with other countries. In this backdrop, Federal Board of Revenue (FBR) moved Summary to the Federal Cabinet seeking permission under Rule 16(I)(h) of the Rules of Business, 1973 to upgrade and renegotiate the existing Pak-Swiss treaty with special reference to Article 26 on Exchange of Information. The Cabinet accorded approval to renegotiate Pakistan Switzerland Avoidance of Double Taxation Agreement. Accordingly, in August 2014, Convention on Avoidance of Double Taxation was renegotiated, highlight of which was replacement of archaic formulation of Article 26 with a new one reflecting internationally accepted standard on “Exchange of Information” backed by both OECD and UN. The new Article, upon formal signing of the ADTA will oblige the Swiss Authorities to exchange all requested information, including heretofore confidential bank account information. Information requested under new Article cannot be refused or declined on the mere pretext that the same is not of any use for their domestic taxation and is held by any other authority and not available with the tax authorities. However, the said Article provides for Exchange of Information upon request and does not support automatic exchange of information.
The renegotiated Pak-Swiss Treaty is still under the process of review in respect of certain articles of the Convention like Article 10 on dividend, therefore, not yet signed.
Sources said that since, the Pak-Swiss renegotiated Convention is still under review, simultaneous efforts are under way to become member of internationally sponsored initiatives on Exchange of information like Global Forum for Transparency and Exchange of Tax Information and Multilateral Convention for Mutual Administrative Assistance in Tax Matters. Pakistan has joined Global Forum as its 111th Member in 2013 and has successfully cleared first phase of Peer Review in June, 2015. Assessors of Global Forum visited Pakistan from 8-9 March, 2016 to assess the processes relating to Exchange of Information for the second phase.
Pakistan”s request to become a signatory to the Multilateral Convention for Mutual Administrative Assistance is under the process of review by the OECD. After signing the MC Pakistan would be able to benefit from the largest international network of exchange of information which provides for all three strands of Exchange of Information ie exchange of Information on request; Automatic Exchange of Information and Spontaneous Exchange of Information.
Pakistan has also signed an MOU with the HMRC UK (Her Majesty”s Revenue and Customs) for assistance in exchange of information. Pakistan”s integration with the rest of the world though above mentioned frameworks, would in a few years time, help to retrieve all important bank account, dividend, interest and asset ownership information not only from Switzerland but also from other tax havens, and tax it accordingly, they added.
