$200b stashed in Swiss banks ‘off limits to Pakistan’

ISLAMABAD: It seems the secret of the $200 billion stashed in Switzerland by Pakistanis will remain a secret, as tax authorities on Tuesday said that the revised treaty on the Avoidance of Double Taxation did not cover past transactions.

“The scope of the revised treaty is limited to the transactions that would be carried out from January 2018,” said Dr Mohammad Iqbal, Member Inland Revenue Policy of the Federal Board of Revenue.

He was apprising the Senate Standing Committee on Finance about the status of retrieving money that Pakistanis have stashed in Switzerland.

“The exchange of information would begin from January, but strictly speaking the information can be sought on [the] request only about the prospective transactions,” said Iqbal.

“Retrieving money of Pakistani nationals deposited in Swiss banks does not fall in the domain of the FBR nor is mandated by any agreement made for the avoidance of double taxation,” according to the FBR.

However, he said that the steps were taken to seek information for the purpose of taxation.

Hearing of Ishaq Dar’s references case adjourned till January 18

Iqbal said that the exchange of information article was renegotiated and updated with Switzerland on the basis of the latest Organisation for Economic Cooperation and Development (OECD) model, which extends its scope beyond the information available with the tax administration in normal course of business.

“In 2014, the then finance minister Ishaq Dar had informed parliament in writing that Pakistanis had stashed about $200 billion in Swiss banks and the government would retrieve the money by revising the avoidance of double taxation treaty,” said Senator Saleem Mandviwalla, the chairman of the standing committee.

“But after that statement we never heard about the $200 billion,” he added.

Iqbal said that the revised Avoidance of Double Taxation treaty did contain the Article on Exchange of Information on the request for tax purposes.

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He said under the revised treaty, which the Swiss parliament has yet to ratify, only specific information could be obtained for tax purposes.

The FBR official clarified that the bilateral treaty did not cover automatic exchange of information.

The FBR’s statements in the meeting suggested that the country would never be able to retrieve $200 billion and that Ishaq Dar had played to the gallery.

ANP’s Senator Ilyas Bilour said that former finance minister had breached the privilege of parliament by providing incorrect information about the $200 billion issue.

He said that Dar should not have given the irresponsible statement at that time.

But Minister of State for Finance Rana Muhammad Afzal said that Dar’s statement was based on the statements given by the Swiss financial sector authorities.

He said $200 billion was not an authentic figure and was not received from Switzerland through any official channel.

The standing committee also quizzed the FBR over back-paddling on the initial revised draft of the bilateral treaty after initialling it, which wasted two precious years.

In August 2014, Pakistan initialled the revised treaty with Switzerland, which would have allowed it to get information in early 2015. Surprisingly, in Sep 2014, the federal government decided to renegotiate the treaty despite initialling the agreement.

In May 2017, the federal cabinet finally ratified the revised bilateral treaty but it did not cover old transactions.

Iqbal defended the decision. He said that the negotiating team had given some favours to Switzerland which, according to him, was not in the national interest.

He said that the team had agreed to halve the dividend income tax rate to 5% for Swiss companies.

Interestingly, Pakistan has signed 5% dividend rate with over a dozen countries. It signed 5% dividend rate with Spain and Czech Republic in 2016 – after the government frustrated the Swiss Treaty on the same ground in 2014.

Iqbal levelled another allegation. He said that the team had agreed to give the Most Favoured Nation status to Switzerland, which would have allowed it to claim benefits that Pakistan in subsequent years grant to other countries.

People, who were involved in those negotiations in 2014, said the team agreed to give the MFN status in return for winning concessions on royalty, interest and shipping.

The amount of harm Mr. Dar has done to Pakistan will go down in history ….. thank you Nawaz Sharif.Recommend

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Original news : https://tribune.com.pk/story/1604605/2-200b-stashed-swiss-banks-off-limits-pakistan/