Swiss team to discuss revision of dual taxation treaty: Visit likely by August-end
A Swiss delegation is likely to visit Pakistan by August-end to discuss the possibility of re-negotiating and upgrading treaty on Avoidance of Double Taxation between Pakistan and Switzerland. It is reliably learnt on Tuesday that Pakistan is set to re-negotiate and upgrade treaty on Avoidance of Double Taxation with Switzerland to tax undeclared money held in the Swiss bank accounts by the Pakistani nationals.
The Cabinet had given its approval for renegotiating Pakistan-Switzerland Avoidance of Double Taxation Agreement (DTA). The existing Pakistan-Switzerland DTA will be re-negotiated and upgraded in line with the latest trends in all important areas of international co-operation. It is further learnt that officials of the Swiss government are expected to come to Pakistan by end August to re-negotiate Avoidance of Double Taxation convention between Pakistan and Switzerland.
Pakistan’s treaty with Switzerland signed in 2005, and enforced in 2008, does carry Article 26, but it is seriously deficient, and hardly enables any of the countries to exchange meaningful tax information about their citizens/taxpayers. Reportedly, Pakistani nationals have over US $200 billion stashed in Swiss banks. Tax authorities are very serious to expedite revision in the treaty with Swiss authorities to overcome revenue shortfalls by taxing all such un-declared money held in Swiss banks by Pakistanis. Presently, FBR is not in a position to legally seek bank account’s information of Pakistanis from Switzerland. The Article 26 (exchange of information) of the Avoidance of Double Taxation Convention is major hurdle in seeking bank accounts details of Pakistanis from Swiss authorities.
Pakistan will also use diplomatic channels to approach the Government of Switzerland after approval of the Cabinet to revise the said treaty, sources maintained. Following implementation of the revised convention, Swiss tax authorities would be answerable to the FBR for providing details about the banks accounts of Pakistani nationals held in Switzerland. The FBR intends to collect information of bank accounts maintained by Pakistanis in various banks of Switzerland under the said treaty to recover billions of dollars and apply tax on money held aboard.
It is, therefore, of paramount importance that the existing Pakistan-Switzerland DTA is renegotiated and upgraded in line with the latest trends in this all-important area of international co-operation. For which purpose, Government of Pakistan’s intent has to be expressed to the Government of Switzerland through diplomatic channels, after seeking approval of the Cabinet.
Swiss Parliament had legislated “The Return of Illicit Assets Act” (RIAA) on October 1, 2010, empowering the Swiss Federal Tax Administration (FTA) to sign Article 26 of the OECD Model Tax Convention in its Avoidance of Double Agreements (DTAs) with other countries, and answer favourably to international requests for exchange of bank account information of all kinds. Many a countries scrambled to upgrade their DTAs with Switzerland (primarily to incorporate OECD-prescribed Article 26 – “Exchange of Information”), including but not limited to US, Germany, France, UK, the Netherlands, Qatar, and India, resulting in impressive tax revenue gains, and repatriation of capital back to home countries.
