Bringing home the money

Pakistan is a poor country but like all poor countries it has a very rich minority — and they like to keep their wealth as far from the eyes and fingers of the regulatory authorities as possible, including the taxman. Switzerland is where money, both legally and illegally obtained, is parked. As much as $200 billion may have been placed there by Pakistani citizens, and the Inland Revenue Department would like to know who and how much, the better to bring back taxes to the national exchequer. To this end a new double taxation agreement is to be signed with the Swiss on 21^st March. The new treaty has taken three years to negotiate and in theory will act as a waypaver for an exchange of information regarding undeclared Pakistani wealth residing in Swiss banks.

As the Panama Papers case has proved conclusively great wealth breeds opacity, obscurantism, finagling and the muddying of every possible pool in an effort to prevent inconvenient truths emerging into the public domain. Thus with the Swiss, who have complex privacy protections built into their banking system. At least in theory the new treaty is going to enable a more regular flow of information, which again in theory will allow the revenue-men to extract taxes from those with money in Swiss accounts. There has yet to be a test case that is proof-of-concept, and it is far from clear or certain that such information as might be obtained is going to be useful for anything other than purely political purposes. The new treaty was not the only option for Pakistan in chasing down the money. It has fulfilled all the requirements for membership of the Multilateral Convention on Tax Matters with the Organisation for Economic Cooperation and Development (OECD), operational as of 2018.

Considerable time and effort has been spent on what may eventually be a fruitless exercise. Whilst we welcome the new treaty we would welcome more an equally determined effort to reform domestic taxation in such a way that those that keep their wealth at home are brought into the tax net.

Published in The Express Tribune, March 10^th, 2017.

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