ISLAMABAD: Pakistan has officially decided to share financial information about bank accounts of non-residents on reciprocal basis under a multilateral tax convention with the Organisation for Economic Cooperation and Development (OECD) nations.

The sharing of information will start from September 2018 after installation of required hardware and software at the Federal Board of Revenue (FBR) and other dedicated units.

The decision for automatic exchange of information was taken after satisfactory clearance from the officials of OECD who recently visited the FBR for a detailed review.

Financial information sharing with 56 countries; Pakistan to join Peer Review Group this month

In compliance with the OECD convention, various laws and persistent efforts for the last two years, Pakistan has now become a member of the Peer Review Group (PRG) of the Global Forum for the period of 2018-20.

The PRG is a group of 30 countries which enjoy the power to negotiate, review and monitor policy regarding automatic exchange of information of all the member countries.

A formal appreciation letter was also sent in May to the FBR last month highlighting the early compliance in a short time for installing the whole set up—hardware and software along with other required legislation. The letter mentioned this kind of work was not even carried out in developed countries in such a short time.

As per agreed plan, a total of 56 countries have shown their willingness and officially notified necessary requirement for automatic exchange of information with Pakistan.

In the first phase which will start from September 2018, Pakistan will exchange information with 35 countries, while in September 2019 another 20 countries will be added to the list of sharing of information. In 2020, only 1 country will be added to the list for exchange of information.

Regarding the 48 other members, most of them have not published their intention so far regarding sharing of information while some of the member countries have also denied to share information with Pakistan so far.

A source in the FBR said that it is up to Pakistan to negotiate or engage those countries on bilaterally for making them agree to share information with Pakistan. However, the source said the issue at the movement was not on the priority list of the of the government.

The information to be shared includes closing balance of bank accounts on December 31, 2017 of non-residents regarding interest payments, dividend income or other incomes coming into that account. Similarly, the information of closing bank accounts of each calendar year will be shared with the member countries.

In September 2016, Pakistan signed the Convention on Mutual Administrative Assistance in Tax Matters, which paved the way for the exchange of information regarding offshore accounts. The need for signing the convention arose in the wake of the Panama Papers case.

Currently, there are 104 signatories of the Convention on Mutual Administrative Assista­nce in Tax Matters.

Pakistan has already notified rules for collecting information from domestic banks and financial institutions. FBR has also set up six automatic exchanges of information (AEOI) zones across the country.

Under the convention, information will be exchanged about those non-residents who opened bank accounts in Pakistan in July-December 2017. There is no cash limit for bank accounts of non-residents during this period.

Contrary to this, bank accounts of non-resident individuals that were opened in Pakistan prior to July 1 with more than $10,000 will also be shared with OECD treaty members.

The FBR has already notified the rules for the implementation of the convention. The adoption of common reporting rules in 104 countries will enable each member to discover undetected tax evasion. These rules will also enable governments to recover tax revenue lost to non-compliant taxpayers.

Peer Review Group

Pakistan has become one of the 30th members of the Peer Review Group (PRG) of the Global Forum. The PRG is like FATF with the power to place any given member on a “grey list” or a “black list.” If two members of the PRG disagree with any report, the review report of that country cannot be passed.

It meets 3-4 times a year and carries out in-depth monitoring and peer review of implementation of the international standard on exchange of information on request. It is chaired by Singapore and assisted by four vice-chairs — Cayman Islands, India, the United Kingdom and the United States.

The PRG is set up to carry out an in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes.

Pakistan will attend its first PRG meeting in mid-June 2018 when the country is expected to formally join the group.

Published in Dawn, June 3rd, 2018