PAKISTAN has formally started sharing bank account details of non-residents on a reciprocal basis with 38 countries under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters of the Organisation for Economic Cooperation and Development (OECD); with effect from September 1, 2018.

Ten countries will provide information on a non-reciprocal basis.

Initially six month’s account balance, from July 1, 2017 to December 31, 2017, will be shared which shall include interest payments and dividend and other income being credited to these accounts. Calendar year data will be shared with member countries from September 2019 onwards.

The need for such an agreement was felt in the wake of the loss of trillions of dollars in potential revenue owing to the worldwide menace of tax evasion and avoidance

As per the agreement, there will be an exchange of information of those non-residents who opened new accounts in Pakistan between July-December 2017 — irrespective of cash limits; and vice versa. Further accounts of non-resident individuals that were opened in Pakistan prior to July 1 with more than $10,000 will also be shared with the intended partners.

A further 17 countries will start sharing information of Pakistani residents on reciprocal basis from September 2019.

The need for such an agreement was felt in the wake of the loss of trillions of dollars in potential revenue owing to the worldwide menace of tax evasion and avoidance. It was therefore decided that legal or illegal flows should be traced through cooperation between tax administrations of all OECD member countries.

A tax official said the Federal Board of Revenue (FBR) has started receiving information effective from September 1, 2018. “This process will be completed by September 30 which is the deadline for sharing the information,” he said, adding that the FBR will also share non-residents information with the 38 countries.

There has been a lot of talk about stashed funds parked in a few choice destinations overseas such as the British Virgin Islands, Cook Islands, Singapore, Netherlands, UK, the UAE and Switzerland.

While a few countries have already ratified the convention and will consequently begin sharing information soon, the hope of bringing back funds stashed in Swiss banks shall continue to remain unachievable. Switzerland has so far not offered to exchange any information to Pakistan, even though it has offered the same to 60 countries under the multilateral tax convention.

Pakistan signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters with the OECD on September 14, 2016, and ratified and enforced the convention from April 1, 2017. On December 20, 2017 Pakistan submitted a list of 101 intended exchange partners for an automatic exchange of financial information.

As per the agreed plan, the FBR has already registered 456 financial institutions to process the information along with installing the technology necessary to process it. The FBR has also established six automatic exchanges of information zones (AEOIs) for processing cases received in the process.

AEOI zones have been established at Regional Tax Offices (RTO) in various parts of the country, each of which will cater to the cases that fall under their respective jurisdiction.

Six commissioners of Inland Revenue will be posted as focal persons for collecting data from banks regarding non-residents.

Moreover, an isolated centre, dedicated for the receipt of information and data processing has been established in the FBR headquarters. Selected officers are allowed to access this centre to ensure transparency. For assigning jurisdiction to AEOI cases, the FBR has already notified rules for reporting of data by financial institutions and working of AEOIs.

Chartered Accountant Ashfaq Tola, who helped overseas Pakistanis declare their assets under the amnesty scheme, told Dawn that the scheme announced by the previous government has deterred non-compliant taxpayers.

He said that there is now a fear among those who did not avail the tax amnesty scheme and they are already inquiring about the possible impact of this information sharing. However, since it has been observed that most Pakistanis living abroad have dual nationalities, it will be a very tough for the FBR to bring money back from abroad.

Published in Dawn, The Business and Finance Weekly, September 10th, 2018