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Islamabad-Geneva sign treaty on avoidance of double taxation

Islamabad-Geneva sign treaty on avoidance of double taxation

ISLAMABAD: Three days visit of the Pakistani delegation to Switzerland ended in signing a revised treaty on avoidance of double taxation. The treaty will also help Islamabad seek information about the money deposited by Pakistani nationals in Swiss banks for tax purposes.
The documents were inked at the conclusion of talks held in Geneva to renegotiate the July 2005 Convention for Avoidance of Double Taxation with respect to tax on income.
According to reports, the amended treaty will be formally signed in the first quarter of next year and it will require at least one more year to enforce it. On behalf of Pakistan, FBR Chief (International Taxes) Ashfaq Ahmed signed the agreement.
The reports point out that major difference between the July 2005 treaty and the revised one is the adoption of updated Article 26 of the Model Tax Convention of the Organisation for Economic Cooperation and Development (OECD).
According to the Article 26, competent authorities of contracting states will exchange such information as is foreseeably relevant for applying provisions of the Model Tax Convention or to the administration or enforcement of domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states.
Article 26 will allow Pakistani authorities to seek information from Swiss banks as currently there is no legal instrument available.
Pakistan has similar clauses in domestic tax laws but the FBR has been unable to successfully apply these for the recovery of taxes. Article 165A and 176 of the Income Tax Ordinance 2001 allow the FBR online access to bank accounts besides seeking a range of information.
Under Article 165A, banks are bound to give online access to its central database containing information about all accountholders. However, the present government has reduced the scope of the article by inserting a clause that if a person files income tax return, banks will not be bound to provide information about his accounts.
The federal government, particularly Finance Minister Ishaq Dar, has given an impression that the revised treaty will allow the country to bring back $200 billion said to have been stashed in Swiss banks. However, Switzerland Ambassador to Pakistan and Afghanistan Marc George has dismissed any such perception.
He declared that the Avoidance of Double Taxation treaty would not facilitate the recovery of any ill-gotten money presumably kept in Swiss banks, adding that for that purpose, there was a separate treaty on sharing of confiscated assets signed on May 18, 2005.
The ambassador also denied that the Pakistanis had parked $200 billion in Swiss banks.