ISLAMABAD: The Federal Board of Revenue (FBR) has asked banks to improve their reporting system to bring it on a par with International Reporting Standards (IRS) for the exchange of financial information regarding bank accounts of non-residents with members of the Organisation for Economic Cooperation and Development (OECD).
“All banks have been advised to improve their reporting system in the next few months,” a senior tax officer of the FBR told Dawn on Monday.
In September, Pakistan signed the Convention on Mutual Administrative Assistance in Tax Matters, which paved the way for the exchange of information regarding offshore accounts. The need for signing the law was felt in the wake of revelations in the Panama Papers.
To comply with the convention, Pakistan will now have to provide information of non-residents with banks accounts in Pakistan July 1, 2017 onwards to over 100 members of the OECD treaty.
“We have held several meetings so far with banks’ representatives to sensitise them to the requirements of the automatic exchange of information of bank accounts under the convention,” the official said.
The official said the government has already introduced amendments to Income Tax Ordinance 2001. Section 165B was introduced in the ordinance about sharing of bank account details of non-residents with their countries of origin.
Another amendment was introduced in the law to keep citizens’ information secret, which will remain available only to the departments concerned.
The FBR introduced Section 165A in the ordinance a couple of years ago to seek bank account details of Pakistanis. However, this amendment was challenged in court and was stayed.
The official said Swiss parliament will ratify the amendments to the bilateral convention between the two countries for the avoidance of double taxation with respect to income. “We expect the revised convention will come into effect from March 2017,” the tax official said. Pakistan has already ratified the revised convention with Switzerland, the official added.
On a bilateral level, Pakistan signed agreements for the avoidance of double taxation with almost 63 countries. These agreements are based on the UN model, which is not binding on member states, for sharing information on investments, bank deposits, etc.
OECD Model Article 26 of the Avoidance of Double Taxation Treaty empowers a signatory nation to seek information regarding specific persons for specific reasons.