Dual taxation, fiscal evasion: Finance Act expands scope of agreements
Finance Act 2015 has expanded the scope of the agreements meant for avoidance of double taxation and prevention of fiscal evasion to be executed by the federal government.
Explaining the Finance Act 2015, Former FBR Member Habib Fakharuddin said that the federal government may enter into an agreement, bilateral or multilateral with the government or governments of foreign countries or tax jurisdictions for the avoidance of double taxation and the prevention of fiscal evasion and exchange of information including automatic exchange of information with respect to taxes on income imposed under this Ordinance or any other law for the time being in force and under the corresponding laws in force in that country, and may, by notification in the official Gazette make such provisions as may be necessary for implementing the agreement.
For the purposes of exchange of information, the Board has been empowered to obtain and collect information when solicited by another country under a tax treaty, a tax information exchange agreement, a multilateral convention, an inter-governmental agreement and a similar arrangement or mechanism.
Further to ensure confidentiality, notwithstanding the provisions of the Freedom of Information Ordinance, 2002, any information received or supplied, and any associated communication or correspondence made, under a tax treaty, a tax information exchange agreement, a multilateral convention, a similar arrangement or mechanism, will be confidential except for the situation covered under section 216(3) [Disclosure of information by public servants], he said.
Former FBR Member said that the corresponding new section 165B has been added for obtaining information from the financial institutions including banks in respect of non-resident persons in the prescribed form and manner for the purpose of automatic exchange of information under bilateral agreement or multilateral convention by the Board. Further to ensure confidentiality, any information received, will be confidential except for the situations covered under section 216(3) [Disclosure of information by public servants].
The financial institutions including banks will provide the information, notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962, the Protection of Economic Reforms Act, 1992, the Foreign Exchange Regulation Act, 1947 and any regulations made under the State Bank of Pakistan Act, 1956.
Corresponding amendment has also been made in section 176(1) to obtain information from any person, whether or not liable to tax under the Ordinance, to fulfil any obligation under any agreement with foreign government or governments or tax jurisdiction, Habib Fakharuddin added.
Unlike section 216 of the Income Tax Ordinance, 2001 there was no provision in the Sales Tax Act, 1990 classifying confidentiality and placing restrictions on disclosure of any information acquired under Sales Tax Act by the public servants. A new section 56B has been inserted in the Sales Tax Act, 1990 declaring that any information acquired under any provision of the Sales tax Act, 1990 or in pursuance of a bilateral or multilateral agreement or tax information exchange agreement shall be confidential and no public servant shall disclose any such information, except as provided under section 216 of the Income Tax Ordinance, 2001. It is also provided that the provisions of section 216 of Income Tax Ordinance, 2001, shall, mutatis mutandis, apply to the provisions of this section, he added.
