Government spots 645 firms to probe tax issues of non-residents
KARACHI: Authorities have spotted more than 600 local firms to investigate the tax status and gather other financial information of non-residents, as new rules on data sharing, under an international treaty, kicked in to fight tax evasion, officials said on Friday.
The officials said the Federal Board of Revenue (FBR) asked more than 600 local financial institutions to share investment and banking data of non-residents sought by foreign countries under an international tax treaty.
The officials said the board identified 645 financial institutions and stock brokers, which could be approached to obtain financial information of foreigners. The reporting entities were identified under the common reporting standards for exchange of information treaty of Organization for Economic Cooperation and Development (OECD), they added.
In 2016, the country became a signatory to the OECD multilateral convention on mutual administrative assistance in tax matters after signing the convention. This was made possible after a long process of more than two years, which included peer reviews and amendments in domestic income tax laws to meet the requirements of OECD. The convention would facilitate international cooperation on national tax laws and provide administrative cooperation among member countries to combat tax evasion. Pakistan, under the treaty, would get an access to historical and current financial details of its citizens who hold more than one million dollars in their overseas bank accounts after the implementation of OECD’s international treaty on tax evasion from July last year. Around 105 countries adopted common reporting system under the international tax treaty.
The official said FBR sought information of foreign investors and depositors from conventional and Islamic banks, asset management companies, fund managers, stock brokers and investment companies.
“These details of foreigners will be exchanged with OECD member countries to obtain information of Pakistanis living abroad and having deposits in respective jurisdictions,” the official said.
The official said the primary objective of information exchange is to prevent tax evasion. FBR would receive information of foreigners from the identified financial institutions by May 31.
Early this month, government introduced laws to give tax incentives for citizens to declare their offshore assets. US credit rating agency Moody’s Investors Service said the one-off tax amnesty scheme announced for undeclared local and foreign assets is likely to jack up revenue by 0.3 percent to one percent of GDP till June-end, which would give a relief to the country that faces fiscal and current account pressures.
FBR has already notified financial institutions, which are excluded from reporting under automatic exchange of information. The financial institutions include Industrial Development Bank Limited, Central Depository Company, Pakistan Kuwait Investment Company Limited, Pak Libya Holding Company Limited, House Building Finance Company Limited, Pak Brunei Investment Company Limited, PAIR Investment Company Limited and Saudi Pak Industrial and Agricultural Investment Company Limited.
The FBR official said the OECD has adopted a strict approach towards the domestic lists of non-reporting financial institution. “Stringent criteria have been adopted to exclude the financial institutions from reporting requirement,” the official added.