ISLAMABAD: Switzer­land has agreed to revise the terms of a 2005 treaty, which will allow both countries to shore up information-sharing mechanisms that will help detect tax evaders who have stashed their assets in Swiss banks.

In policy statements before both houses of parliament on Wednesday, Finance Minister Ishaq Dar revealed that the Swiss government had agreed to revisit its bilateral convention on the avoidance of double taxation and had invited Pakistan to sign a fresh accord.

“We have received a letter from Swiss authorities dated March 2, proposing four dates — March 21, May 5, May 23 and 24 — for signing the convention,” Mr Dar said.

Both sides have already initialled the revised draft of the convention for the avoidance of double taxation with respect to income tax.

Pakistan has already ratified the revised convention. Now, Swiss parliament will ratify the amendments to the bilateral convention between the two countries before it is signed.

Mr Dar told the National Assembly that the government would opt to sign the treaty at the earliest possible date, because the finance division will be busy preparing the budget for the next financial year in May.

Dar informs parliament of Switzerland’s invitation to revise double taxation treaty

Both sides initiated talks on the revised convention in 2014, following unconfirmed reports that Pakistani nationals had over $200 billion stashed in Swiss banks.

Pakistan and Switzerland signed a double taxation treaty in 2005, which was enforced in 2008. This treaty was based on the UN model, where it is not binding on member states to share information about investments, banks deposits, etc.

Pakistan has signed agreements for avoidance of double taxation with almost 63 countries on the same model.

Mr Dar told the National Assembly that the wording of the previous treaty with respect to the provision of exchange of information was “quite weak”.

“Then, in 2010, the Organisation for Economic Cooperation and Development (OECD) — of which Switzerland is a member — adopted a minimum standard on the exchange of information,” he said.

Mr Dar contended that the PML-N government had convinced Swiss authorities to revisit the earlier treaty on the basis of the standards set by the OECD.

It is not just Switzerland, but several other countries such as Malaysia, UAE and UK have also showed no eagerness to share information with Pakistan about the wealth stashed there.

To move forward on a bilateral basis, the government has now negotiated the incorporation of the latest OECD model, which empowers signatory nations to seek information regarding specific persons for specific reasons.

The government has negotiated and included Article 26 of the OECD model in the convention on avoidance of double taxation with Switzerland. This will now provide a mechanism to inquire about Pakistani specific citizens’ funds in Swiss accounts.

But even this law does not allow demands for general information from Switzerland.

Article 26 of the OECD model could help access bank accounts of citizens and their assets, but the information received or exchanged will be treated as secret and can only be disclosed to persons or authorities including courts and administrative bodies like tax department for assessment purposes.

There are also provisions in the article that empower a contracting state to decline information solely on the plea that it has no domestic interest in such information.

But sharing of information will not be declined if the information is held by a bank, financial institution, nominee or a person acting in an agency etc because it relates to ownership interests of a person.

Published in Dawn, March 9th, 2017