IT has been a long road but finally the end is in sight. The Swiss authorities are now ready to sign a convention with Pakistan that will facilitate the sharing of information to prevent tax avoidance and evasion. The convention goes a step further than many other bilateral treaties that Pakistan has with other countries in that compliance is not voluntary, except in cases where the authorities have reason to believe that the information being sought is for purposes other than pursuing tax evasion, such as political victimisation. The convention, once activated, will significantly enhance the powers of the FBR to locate details of tax-evaded wealth stashed away in Swiss accounts.

But here the good news ends. A number of important caveats now hang over the moment. One is that there is no shortage of tax havens in today’s world, and people can find other places to safely stash their black money. It is not clear if the convention grants access to past information on accounts that have been closed. If so, it can continue to be helpful even after the party in question decides to relocate the money to some other jurisdiction. But the biggest caveat is that of political will. Pakistan has a poor track record of apprehending people for tax evasion, even in cases where there is a treaty in place for exchange of information for tax purposes. Part of the reason owes itself to the manner in which such powers are sometimes used, either for political victimisation which makes the authorities receiving the request wary of honouring it, and part of it because the tax authorities here can use them for fishing expeditions by submitting broad-based and open-ended requests for vast troves of information. For the treaty to be effective, the authorities will have to demonstrate seriousness of purpose when submitting requests, and often will have to muster the political will to go after those parties that enjoy high-level support. This is not a toothless convention that is about to be signed, but the teeth will only be effective when they are used properly. Tax evasion and avoidance have been perennial issues in our economy, dominated as it is by black money and illicit flows. The signing of the tax convention is a hopeful step, but how far it helps to actually apprehend holders of black money still remains questionable.

Published in Dawn, March 10th, 2017