ISLAMABAD, March 22: The seven Saarc member countries on Monday initiated dialogue on signing a multilateral taxation treaty with limited scope with regard to avoidance of double taxation among the member countries.

Official sources told Dawn that the first meeting of the inter-governmental expert group (IGEG) started on Monday in New Delhi to discuss besides other issues the proposed multilateral taxation treaty.

The decision for initiating negotiations on taxation treaty was taken in the council of ministers meeting held in Islamabad on January 2-3, 2004.

According to the officials, due to rapid means of communication, the world has turned into a global village. There was thus tremendous increase in transnational transactions and interactions.

To cope with all these, there was a need for a multilateral treaties in the fields such as income, arbitration, privileges and immunities, security and administrative assistance.

Elaborating further, the officials said most of the Saarc countries have concluded quite a few double taxation agreements with developed as well as developing countries.

The agreements, conventions concluded in fifties and sixties were based on earlier models. However, after 1980, UN model modified by OECD model has been used for concluding such treaties with developed countries.

"This has been done to strike a best possible bargain and arrive at some sort of equilibrium in the taxing rights of country of residence and country of source.

These countries are mindful of the fact that over insistence on source taxation might result in making these countries unattractive for foreign investment," they remarked.

Multilateral taxation treaties had already been signed by a number of countries--Arab Tax Treaty (Egypt, Iraq, Jordan, Kuwait, Sudan, Syria and Yemen) a Multilateral Convention adopted by-- Bolivia, Columbia, Chile, Ecuador, Peru and Venezuela; Kenya, Tanzania, Uganda agreement; Nordic countries--Denmark; Finland, Iceland, Norway and Sweden.

According to the officials, until an appropriate conditions were created for signing multilateral taxation treaty by the Saarc countries, the forum of IGEG could be used to exchange ideas on the subject as well other areas of transnational taxation.

Besides, all the Saarc members could pool their resources to study common taxation problems and develop practical programmes for increasing the productivity of their taxation systems.