Tax havens around the world have refused to cooperate with Pakistan in regards with sharing information on offshore assets as the country cracks down on tax evaders.
In a bid to curb tax evasion, more than 101 countries committed to automatic exchange of financial information between their jurisdictions under the new Automatic Exchange of Information Programme (AEOI) of the Organization for Economic Cooperation and Development. The programme took effect on Sept 1, 2018.
List of Exchange Partners
Negotiations between the member countries have been going on to finalize the list of exchange partners since the past few years.
As per the finalized list, 11 countries, that have also being identified as tax havens, have refused to share any financial information about assets and investments made by Pakistani nationals in their countries.
These countries include Anguilla, Barbados, Bahamas, Cayman Islands, British Virgin Islands, Bermuda, Niue, Samoa, Panama, Mauritius, and Hong Kong.
The tax havens that agreed to share information with Pakistan include Singapore, Netherlands, Seychelles, Jersey, Luxembourg, Ireland, Curacao, and Cyprus.
Reportedly, Pakistan is already considering the funds stashed in the Cook Islands, the Netherlands, the UAE, the UK, Switzerland, Singapore, and the British Virgin Islands. Some countries have even ratified the convention to share information with Pakistan.
However, funds sitting in Switzerland are still out of reach, as the country has not yet agreed to share information on bank accounts under the multilateral tax convention.
Switzerland Among the Refusing Countries
Interestingly, Switzerland has agreed to share information with 60 countries including India under the same OECD convention.
Dr. Mohammad Iqbal, Federal Board of Revenue Spokesperson, stated that the Bureau had sent two letters to Switzerland in this regard. He further said that the country was skeptical about Pakistan’s system of handling such data. However, FBR had informed the Swiss authorities about the current system in the Board and believes that it can satisfy Switzerland’s concerns.
“We are expecting to get the offer from Switzerland,” he says. He also maintained that the FBR managed to get many countries to commit to the automatic exchange of information. The bureau will engage the remaining countries at a later stage, he added.
The FBR official also said that the more pressing issue is related to the processing of data, as the bureau is already receiving information from other countries.
FBR Prepares the Paraphernalia
Under the tax convention, Pakistan will exchange information with around 38 states this year. 10 countries have already shared information while 17 more will do that from September next year. 3 more countries will share the date with FBR from September 2020.
As for processing information received already, the FBR has set up six automatic exchange of information zones (AEOIs) at Regional Tax Offices (RTO) across the country. These offices shall deal with the cases that come under their jurisdiction.
The bureau shall assign six commissioners of the Inland Revenue for data collection from banks on the non-residents.
Furthermore, an isolated center has been set up with the FBR headquarters. This center shall receive information and process the data.
Only a few selected officials shall be allowed to access this center to maintain transparency.
It is pertinent to mention here that the FBR has issued a notification of rules for the financial institutions regarding reporting of data and working of AEOIs in a bid to assign jurisdiction to AEOI cases.