ISLAMABAD, Oct 22: The seven-Saarc member countries are likely to finalize draft multilateral tax treaty with limited scope with regard to avoidance of double taxation among the member countries.

Official sources told Dawn on Friday that the meeting of tax experts from the Saarc countries was scheduled for October 26-28 in Katmandu. Pakistan delegation in the meeting will be represented by member direct taxes, Salman Nabi.

Following the finalization of the draft treaty, the sources said the agreement would be ready for signing at the forthcoming Saarc summit to be held in Dhaka next month.

The first meeting of the inter-governmental expert group (IGEG) was held in New Delhi on March 22-23 this year 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 earlier in Islamabad on January 2-3.

According to the officials due to rapid means of communication, there was tremendous increase in trans-national 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.

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 1950's and 1960's 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.

Pakistan has so far signed comprehensive agreements for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes with Bangladesh on January 1, 1980; with Nepal on January 25, 2001 and with Sri Lanka in January 1983.

Pakistan and India have a limited purpose agreement for the avoidance of double taxation regarding international air transport, which was effective from March 1, 1989. Pakistan did not have any limited purpose or a comprehensive agreement for the avoidance of double taxation with Maldives and Bhutan.

It may be added that multilateral taxation treaties had already 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.