The Senate Standing Committee on Finance was informed about the agreement the Finance Minister has recently signed on Multilateral Convention on Mutual Administrative Assistance in Tax Matters which would be presented to the next cabinet meeting for ratification. Federal Board of Revenue Chairman Nisar Muhammad Khan briefed Senate Standing Committee on Finance which met here with Senator Saleem Mandivwala in the chair.
He said that Pakistan was a member of OECD's Global forum on transparency and exchange of information for tax purposes since September 2012. Finance minister on September 14, 2016 has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Pakistan, he stated, has became the 104th signatory to the convention and Finance Minister has also accorded approval for the pilot project to be undertaken by FBR with the assistance of the Global Forum and State Bank of Pakistan and concerned institutions will assist FBR in this regard. The pilot project is in the process in a collaborative effort between Pakistan, and HM Revenue and Customs (HMRC) United Kingdom. The committee was further informed that SBP supports the initiative of FBR and will continue to extend its support for curbing tax evasion as per laws and the basis for exchange of information is the convention and the idea is based on the USA Foreign Account Tax Compliance Act (FATCA).
FATCA could be the appropriate starting point in order to gauge the systems and procedures of banks to manage exchange of information and ability of the country to execute bilateral mechanism of information exchange. SBP has already requested the relevant forums including FBR, Ministry of Finance and Foreign Affairs to take desired actions to negotiate IGA for implementation of FATCA.
The meeting was told that the identification, due diligence and reporting of financial accounts by the financial institutions would be similar to FATCA, and banks in Pakistan are well prepared for FATCA reporting and have successfully reported the requisite data to IRS. However, regarding sharing of information on multilateral basis, banks may need to further enhance their IT systems which can be assessed once FBR shares detailed requirements/modalities of information sharing mechanism.
The discussion with banking industry has not yet been made except for FATCA compliance and FBR guidance would be required to identify the issues needed to be covered during consultation with the banking industry. The FBR would take care of technical aspects including data security as well as secrecy, enforceability of agreement and veracity of information etc.
The meeting was informed the government of Pakistan through Finance Act, 2015 has also introduced provisions for international exchange of tax information (including automatic exchange of information) through bilateral and multilateral agreements with foreign jurisdictions. The policy decision to sign agreements and share information rests with government of Pakistan.