PAKISTAN has become a member of a global forum on an exchange of tax information of offshore accounts and investments.

The need for such an agreement was felt in the wake of revelations in the Panama Papers, of high profile Pakistani personalities investing in offshore companies.

Earlier, there was, however, no serious effort to trace the legal or illegal flows or the origins of this money/investment.

The information can only be shared on specific evidence when Pakistani authorities can provide authentic and specific data. But it might not be an easy task to do for Islamabad

Of course, there has been a lot of talk since the PML-N came to power about Pakistanis holding over $200bn in Swiss banks and several billions of investment in real estate sector in the UAE.

Is it possible to bring these stashed funds back from destinations like British Virgin Islands, Cook Islands, Singapore, the UAE and Switzerland? Certainly, a difficult question to answer.

Pakistan signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters with Organisation of Economic Cooperation and Development (OECD) on September 14.

This convention has a representation of 100 countries. The agreement would be fully activated in the year 2018-19.

This membership will enable Pakistan to receive and send information on tax data under automatic exchange and signal its commitment to fight tax fraud and evasion at the international level. This may help retrieve important bank accounts, dividend, interest and asset ownership information from all signatories to the convention.

On bilateral level, Pakistan has signed agreements for avoidance of double taxation with almost 63 countries, based on the UN model, which is not binding on member states to share information on investments, banks deposits etc.

It was not only Switzerland, but several other countries such as Malaysia, the UAE and the UK which showed no eagerness to share information with Pakistan about wealth stashed there.

A tax official said the only way to know about Pakistani citizens’ funds in Swiss accounts is under the Article 26 of the avoidance of double taxation treaty, which empowers a signatory nation to seek information regarding specific persons for specific reasons. But even that law does not allow demands for general information from Switzerland.

Pakistani and Swiss authorities have initialled the revised draft of the convention between the two countries for the avoidance of double taxation with respect to income tax, which is likely to come into operation in 2017.

To move forward on bilateral basis, the government has also initiated negotiations on bilateral basis with other countries based on the latest OECD model of tax convention.

The government has approved inclusion of article 26 in the convention on avoidance of double taxation with 11 countries like Bahrain, the UAE, Malta, Norway, Denmark, Poland, Bosnia, Hungry, Malaysia, Philippine and Germany. “We have got approval for finalising the revised treaties with all these countries”, a tax official said.

Agreements with Ireland, Brunei and Lithuania have already been signed.

For the remaining 38 countries, a summary from Federal Board of Revenue has been approved by the cabinet. Treaties with all these countries will soon be revised.

The FBR has also decided to make some further additions, particularly those related to collecting minimum tax on shipping companies, in the draft agreement hoping to get some share in taxes from shipping lines as well.

The Article 26 of the OECD model could help access bank accounts of citizens and their assets, but the information received or exchanged will be treated as secret and can only be disclosed to persons or authorities including courts and administrative bodies like tax department for assessment purposes.

There are also provisions in the article that empower a contracting state to decline information solely on the plea that it has no domestic interest in such information.

But a sharing of information will not be declined if the information is held by a bank, financial institution, nominee or a person acting in an agency etc because it relates to ownership interests in a person.

How far the effort of revising bilateral tax treaties and becoming a member of the global convention will succeed will depend on the readiness of other partners in revising existing treaties. There may be very few foreigners who have stashed their tainted money in Pakistan compared to Pakistanis keeping their funds and assets abroad.

Moreover, the information can only be shared on specific evidence when Pakistani authorities can provide authentic and specific data. But it might not be an easy task for Islamabad to do.

Published in Dawn, Business & Finance weekly, September 19th, 2016