Multilateral Convention – a joint initiative of Council of Europe and OECD. Most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance. Prior to Pakistan, there were 103 countries and jurisdictions in the Convention [G-20 countries, OECD countries and many developing countries] (Pakistan is the 104th country). Federal Cabinet approved the Summary On 20th January 2014 submitted by FBR with approval of the Finance Minister for signing the Multilateral Convention. Pakistan then sent a request to the OECD Secretariat expressing its strong interest in becoming Signatory and Party to the Convention. The request was forwarded to the Coordinating Body (CB) of the Convention. Pakistan made consistent efforts to obtain approval of the Coordinating Body by: Making necessary amendments in tax laws (through Finance Act 2015 and in Section 107 of Income Tax Ordinance 2001 through Finance Act 2016), particularly with reference to confidentiality provisions. Pakistan joined the Global Forum on Transparency and Exchange of Information and successfully cleared its 1st Peer Review in June 2015. In June 2016, in the 2nd Peer Review at Oslo, Norway, the Global Forum rated Pakistan as Largely compliant jurisdiction on transparency and exchange of information for tax purposes.
On 14th July 2016, OECD communicated that there is now consensus in the Coordinating Body to invite Pakistan to join the Convention. Date agreed in principle as 14th September 2016 subject to Cabinet approval. On 31st August 2016, Federal Cabinet authorized the Finance Minister to sign the Convention. Prime Minister Nawaz Sharif signed Instrument of Full Powers to Finance Minister on 6th September 2016. Finance Minister signed the Convention on 14th September 2016 at the OECD Secretariat in Paris in the presence of Secretary General OECD. The Convention shall facilitate in the areas of international cooperation for better operation of our domestic tax laws. Pakistan shall be able to exchange information, including information on banking details, on reciprocal basis with other partner countries which is foreseeably relevant for the administration or enforcement of its tax laws
The Convention shall facilitate Pakistan to obtain information from other member countries in the following three ways:
Exchange of Information on Request: On Pakistan’s request, the other member countries of the Convention will provide any information about particular persons or transactions, including information on banking details, which is relevant for the administration or enforcement of our domestic tax.
Spontaneous Exchange of Information: Pakistan and other Parties to the Convention shall, on reciprocal basis, forward to each other any information which may be useful for tax purposes of a taxpayer in the other country.
Automatic Exchange of Information: According to the procedure, Pakistan and other member countries shall automatically exchange information about. each others’ nationals or residents, particularly on banking details. As such, Pakistan will be able to receive information in few years time, on automatic basis, each year, on the banking and other details of its nationals and tax residents from other Parties of the Convention
· The Multilateral Convention shall also facilitate Pakistan and other member countries for the combined tax examinations and recovery of taxes as under:
Simultaneous Tax Examinations which shall provide an arrangement between Pakistan and other member countries to simultaneously examine, each in its own country, the tax affairs of a person or persons in which they have a common interest, with a view to exchanging useful information [useful to counter transfer pricing and other aggressive tax planning measures of the associated, subsidiary and other related entities].
Tax Examinations Abroad which provides that Pakistan may request any other member country to allow its representatives to be present during tax audit of a taxpayer in that country in order to counter tax avoidance measures of the associated or related entities.
Assistance in Recovery of Tax Claims: At the request of Pakistan and other Parties to the Convention, the Requested State shall take the necessary steps to recover tax claims of the first-mentioned State as if they were its own tax claims.
Service of documents: The Requested State shall serve upon the addressee any documents, including those relating to judicial decisions, which emanate from Pakistan and relate to a tax covered by the Multilateral Convention. Other benefits of signing Convention include:It will be hard to stash illegal funds in foreign banks. It will send a strong signal of Pakistan’s commitment to fight tax fraud and evasion at international level. It will integrate Pakistan to the rest of the world in the areas of mutual assistance in tax matters. It will develop strong tax cooperation arrangement between Pakistan and other member countries. It will reinforce FBR to track tax evaders, no matter where they have accumulated their wealth
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