Pakistan yet to include UAE, Panama for exchanging financial data
KARACHI: Federal Board of Revenue (FBR) on Friday issued a list of at least 88 countries, including tax haven Switzerland to automatically swap financial information of their citizens — but does not mention United Arab Emirates and Panama, the tax avoidance hubs for wealthy Pakistanis.
The country will exchange financial information with at least 88 countries from the next fiscal year under an agreement with the Organisation for Economic Cooperation and Development (OECD) to curb tax evasion and avoidance.
FBR issued the list of OECD member countries for the purpose of automatic exchange of information to prevent tax crimes.
The countries include Switzerland, which is infamous for parking in its banks and other avenues illegal money of Pakistanis. The list, however, does not contain the territories, like United Arab Emirates and Panama, which are presently under discussions for potential tax evasion by Pakistanis.
Yet, FBR said the list is provisional and will be updated when required.
In 2016, the country signed OECD’s multilateral convention on mutual administrative assistance in tax matters, which is the most powerful multilateral instrument to control offshore tax evasion and avoidance. The country signed the organisation’s multilateral competent authority agreement in June to implement the convention from July 1.
The FBR also issued letters to the State Bank of Pakistan (SBP) and Securities and Exchange Commission of Pakistan to intimate banks and other financial institutions to provide information of accounts related to residents and companies of 88 enlisted nations.
The FBR, in a letter to SBP, said a financial institution is required to start due diligence procedure for reportable financial accounts from July 1. It is imperative for FBR to issue the list of participating jurisdictions before the cut-off date, it added.
The FBR said the rules pertaining to exchange of information provide a concept of passive non-financial entity, which is defined as an entity that is not active, and is not a participating jurisdiction of a financial institution.
“As a result, reporting financial institutions are required to look through for controlling persons of such investment entities which are not located in participating jurisdictions,” the FBR said. “In such cases the reporting financial institutions will report on the controlling individuals who are reportable.”
FBR further said it is important for financial institutions to have a list of participating jurisdictions, “so that they can carry on with their required due diligence process and to apply the ‘look through’ treatment in case of investment entities, which are non-participating jurisdiction financial institutions.” Dubai Land Authority, in the past, had reported that more than two billion dollars flowed from Pakistan in Dubai’s real estate sector every year.