ISLAMABAD: Pakistan’s top tax machinery is delaying honouring its international commitments to prevent tax evasion and the setting up of offshore accounts for stashing ill-gotten wealth.

The Organisation of Economic Cooperation and Development (OECD) has warned Pakistan that it may lose the right to receive information on a reciprocal basis from other 104 signatories if its implementation of the required measures has deficiencies.

In September 2016, 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 convention arose in the wake of the Panama Papers case.

One of the major conditions for the implementation of the convention was the setting up of six automatic exchanges of information (AEOI) zones across the country.

An official source told Dawn that the AEOI zones were already established. But a team from the OECD secretariat that visited Pakistan in July suggested measures in terms of the arrangements of data safeguards. It was suggested that record rooms be established in each AEOI zone to ensure confidentiality and data safeguard.

The OECD team was expected to visit Pakistan soon to check the status of the guidelines’ implementation and assessment of the AEOI zones. “We have not received any tentative dates of their visit so far,” the source added.

However, in case the measures are found deficient, Pakistan will not receive information regarding its residents’ bank accounts and assets in 104 countries. However, Pakistan is bound to share information automatically with all these countries in any case.

As per the original plan, systems should have been in place and started receiving information from domestic banks for the period from July 1 to Dec 31.

According to the source, one of the reasons is the delay in the release of funds for the establishment of AEOI zones. “Senior management of the Federal Board of Revenue (FBR) was busy with the case of Finance Minister Ishaq Dar,” the source said, adding that the pace of work at the FBR was affected following the filing of a reference in the National Accountability Bureau (NAB) against Mr Dar.

The source said the FBR chairman was seeking permission even in small cases from Mr Dar, who was apparently preoccupied with his case, and that led to further delays in many crucial decisions. “There are many important proposals, which are facing similar implementation delays,” the source said.

Under the convention, information will be exchanged about those non-residents who open their banks accounts in Pakistan in July-December. There is no cash limit for bank accounts of non-residents during this period.

Contrary to this, bank accounts of non-resident individuals that were opened in Pakistan prior to July 1 with more than $10,000 will also be shared with OECD treaty members.

The FBR has already notified the rules for the implementation of the convention. The deadline for sharing information with OECD treaty members for the six-month period was up to September 2018. Information-sharing by OECD treaty members follows calendar year. Pakistan will receive full-year information by September 2019 in case Islamabad complies with OECD standards while collecting information from domestic banks. This means a delay of another year.

Pakistan will be bound to share information of non-residents with OECD treaty members within nine months of the completion of calendar year.

The adoption of common reporting rules in 104 countries will enable each member to discover undetected tax evasion. These rules will also enable governments to recover tax revenue lost to non-compliant taxpayers.

Published in Dawn, October 8th, 2017