The federal cabinet has allowed the Federal Board of Revenue (FBR) to terminate an existing agreement with Greece on avoidance of double taxation on income from the operation of ships and aircraft and negotiate a fresh pact.
According to minutes of the cabinet meeting, Pakistan and Greece signed an agreement on May 7, 1978, which was retrospectively enforced from July 1, 1971.
However, the agreement, ab-initio turned out to be an extremely lopsided arrangement in favour of Greece as it allocates the taxing rights of income from shipping emanating from Pakistani ports entirely to Greece, and allows the income of so called 'containerisation', sale of tickets, and other activities 'directly incidental there to' to be included in the income from shipping and taxed in Greece instead of Pakistan; and permits ships of other countries to fly Greek flag, do business at Pakistani ports, abuse the treaty and conveniently sail back from Pakistani ports.
The Federal Cabinet was informed last week that on account of such one-sided dispensation Pakistan suffered heavily for almost four decades, and the treaty was ruthlessly abused by tax-dodgers around the world under the cover of Greek flag.
Data obtained for just 3 years shows that not a single genuine Greek ship called on Pakistani ports against 66 belonging to treaty-abusers from other countries.
It was argued that allowing treaty abuse is not considered to be a reasonable and appreciable behaviour by the international community. It was stated that for five financial years from 2003-2004 to 2008-09, 181 Greek flag carrying ships called on Pakistani ports against one PNSC ship that hit Athens while PIA stopped flying to Athens over two decades ago.
The Cabinet was informed that according to Article 5 of the treaty, any of the Contracting State desiring to terminate the treaty, may serve a notice through the diplomatic channels before June 30 for the termination to take effect from January 1 of the next calendar year. Therefore, it is proposed that the existing Pakistan-Greece treaty be rescinded forthwith to protect national economic interests. The Ministry of Foreign Affairs concurred.
The Cabinet approved to terminate the 'Agreement for the Avoidance of Double Taxation of income Derived from the Operation of Ships and Aircrafts', paving way for negotiating afresh an equitable agreement.