OECD Convention: SECP assisting FBR in implementation of pilot project

The Securities and Exchange Commission of Pakistan (SECP) is fully assisting the Federal Board of FBR (FBR) in successful the implementation of a pilot project within its regulated sectors for automatic exchange of information under OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Sources told Business Recorder Saturday that Pakistan in September 2016 signed the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters to combat tax evasion.
The convention provides a legal basis for the multilateral agreements between jurisdictions to exchange information automatically on residents'' assets and incomes. Reporting financial institutions are required to exchange information among other jurisdictions, covering custodial institutions, depository institutions, investment entity or a specified insurance company as defined under the CRS Rules and explained in OECD Commentary Section VIII. These include the banks (depository institution), brokers (custodial institution), NBFCs (investment entity) and life insurance companies (specified insurance company).
In this regard, a pilot project is being executed for the implementation of Common Reporting Standard established under the convention by a project team comprising members from FBR, State Bank of Pakistan (SBP), SECP, PRAL, OECD and HMRC UK. Common Reporting Standard (CRS) Rules were notified vide SRO No. 166(I) 2017, dated March 15, 2017, after extensive consultation with the industry and the stakeholder. The SECP being the team member of the pilot project team along with abovementioned team members is fully supporting the FBR in successful implementation of the pilot project within its regulated sectors.
When asked about the SECP laws and regulations dealing with the exchange of financial information with other countries, sources said that the exchange of information will be carried out under the Chapter-XII A of Income Tax Rule and Common Reporting Standard Rules governed by the FBR. The exchange of information will be carried out through Automatic IT System managed by the FBR through Pakistan Revenue Automation Limited (PRAL). There are no SECP laws or regulations dealing with Automatic Exchange of Information under the OECD multilateral convention for tax matters.
However, for the understanding of SECP regulated sectors, the SECP organized various meetings and seminars on how to conduct due diligence and reporting of the information for tax purposes for its regulated sectors. The SECP has communicated the list of participating jurisdictions and advised to start due diligence process from July 01, 2017 to its regulated sectors on behalf of FBR.
About SECP role to ensure reporting by financial institutions to the said participating jurisdictions from July 1, 2017 under global treaties on automatic exchange of information, sources said that the SECP has provided list of reporting financial institutions under the ambit of SECP to the FBR for the purpose of registration. The CRS Rules are part of Income Tax Rules 2001 enforced by the FBR consequently the SECP does not have the regulatory ambit to ensure reporting by the financial institutions.