ISLAMABAD: Pakistani tax authorities intends to collect information of bank accounts maintained by Pakistanis in various banks of Switzerland under Avoidance of Double Taxation Convention between Pakistan and Switzerland to recover billions of dollars and apply tax on money held aboard.
Sources told Business Recorder here on Wednesday that the Large Taxpayer Unit (LTU) Karachi has sought approval of the Federal Board of Revenue (FBR) to establish a special cell to invoke the provision of Article 25(1) of the Avoidance of Double Taxation Treaty between Pakistan and Switzerland by seeking the information regarding the bank accounts maintained by Pakistanis in various banks of Switzerland. This major initiative has been taken by Rehmatullah Khan Wazir Chief Commissioner LTU Karachi, who proposed taxation of money held in Swiss bank accounts by Pakistanis aboard.
Chief Commissioner LTU Karachi conveyed to the Board that the tax authorities are legally authorised to collect the said information under the relevant provisions of the Avoidance of Double Taxation Convention. LTU Karachi has asked the FBR to give clearance for establishing Special Cell for taxing money held in bank accounts by Pakistanis aboard. The LTU Karachi has further informed the Board that the tax department can invoke powers under article 25(1) of the Avoidance of Double Taxation Treaty between Pakistan and Switzerland to collect information of Pakistanis maintaining bank accounts in Swiss banks.
According to the letter of Chief Commissioner LTU Karachi to the FBR, the Swiss Parliament had passed a historical bill in the name of "Return of Illicit Assets Act, 2010" on October 1, 2012, which is a very important piece of legislation that will enable the developing countries including Pakistan to recover the billions of dollars of black money shifted by unscrupulous individuals and companies to that country. After this enactment it is now possible to retrieve the tax evaded money from Switzerland under article 25(1) of the Avoidance of Double Taxation Treaty between Pakistan and Switzerland which clearly makes it obligatory on Switzerland to provide information regarding the Pakistanis who are maintaining accounts in Switzerland. This has already been done by many countries in recent years and months like India, Philippine, Nigeria, Peru, Kazakhstan, Mexico, Mali, Argentina, USA, Germany, UK, etc.
LTU Karachi said that in 2009 Europe and USA forced Switzerland to give up its age-old bank secrecy, as a result the Switzerland government promised to help fight tax evasion. Moreover a bitter US tax fraud probe into wealth management giant-UBS, also opened cracks into the rock solid reputation of the 2 trillion Dollars Swiss wealth management industry. UBS paid an amount of 780 million Dollars as penalty to settle US tax fraud charges in February, 2009. Ultimately UBS also agreed to disclose Swiss bank data belonging to around 4500 of its US clients.
This is the right time for FBR to obtain all information under article 25(1) of the Avoidance of Double Taxation Treaty between Pakistan and Switzerland regarding Pakistanis maintaining accounts in the Switzerland as has been done by many other countries. List of countries with recovered amount of black money from Switzerland revealed that Nigeria recovered US $700 million, Philippines US $684, Peru US $180 million, Kazakhstan US $84, Mexico US $74million, Mali US $2.5million, Argentina US $4.5million and USA US $780million, LTU Karachi said.
It is, therefore, suggested that LTU, Karachi may be allowed to set up a special cell to invoke the provision of Article 25(1) of the Avoidance of Double Taxation Treaty between Pakistan and Switzerland by seeking the information regarding the bank accounts maintained by Pakistanis in various banks of Switzerland. The information so obtained will be processed and tax will be levied as per law wherever applicable.
This exercise will also act as deterrence against outflows of capital from Pakistan, LTU Karachi added. According to Article 25(1) of the Avoidance of Double Taxation Convention between Pakistan and Switzerland, the competent authorities of the Contracting States shall exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as is necessary for carrying out the provisions of this Convention in relation to the taxes which are the subject of this Convention. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes which are the subject of this Convention. No information as aforesaid shall be exchanged which would disclose any trade, business, industrial or professional secret or trade process, it added.