Recovery of Pakistani cash stashed in Swiss banks unlikely
Revised pact with Switzerland is set to improve exchange of info on bank accounts
A national flag of Switzerland flies in front of a branch office of Swiss bank Credit Suisse in Luzern October 30, 2014. PHOTO: REUTERS
ISLAMABAD:
Pakistan and Switzerland have signed a revised pact to improve bilateral exchange of information regime regarding Swiss bank accounts. However, there are bleak chances of recovery of $200 billion hidden by Pakistanis in the Alpine State.
Switzerland’s Ambassador to Islamabad Marc George and the Federal Board of Revenue Chairman Dr Mohammad Irshad on Wednesday signed the revised Avoidance of Double Taxation Agreement.
Switzerland set to share details on Pakistan cash stashed in banks
The existing Avoidance of Double Taxation Agreement between the two countries was signed in 2005, and came into force in 2008. After signing, both the states will now undertake internal procedures for ratification of the deal and it will come into force in Pakistan on July 1, 2018.
According to a statement issued by the Finance Ministry, the revised agreement will open new vistas for cooperation, especially in the areas of exchange of information for tax purposes.
“The new treaty contains improvements with regard to the taxation of service fees and capital gains resulting from the sale of qualifying participants,” it added.
However, sources in the FBR told The Express Tribune that there is little hope that Pakistan will be able to get benefit from this treaty regarding the past transactions. The only benefit that the country will get is that in future Switzerland will not be among the safe havens for Pakistanis.
Sources said Pakistan lost past two years due to political expediency and the people who had stashed the money moved their fortunes to other safe havens by exploiting this opportunity. “They needed some time to withdraw money, which they got due to a delay in signing the deal after initialing it in 2014,” said one of the insiders.
In August 2014, Pakistan initialed the revised treaty with Switzerland, which would have allowed it to get information about $200 billion in early 2015. Surprisingly, in Sep 2014, the federal government decided to renegotiate the treaty despite initialing the agreement.
The decision to initial the treaty in Switzerland by Pakistan’s taxmen was not liked by those who were sitting at the helm of affairs in Islamabad. Lately, the government came up with the excuse that the negotiators did not have the mandate to sign the treaty. Moreover, the negotiating team gave up too much but got nothing in return. However, the treaty was blocked first. One of the reasons to block the treaty for two years was that the negotiating team reduced the dividend income tax rate to 5%.
Interestingly, Pakistan has signed 5% dividends rate with over a dozen countries. It signed 5% dividends rate with Spain and Czech Republic in 2016 – after the government frustrated the Swiss Treaty on the same ground.
Pakistani cash in Swiss banks pulled out?
Another allegation was that the negotiating team had agreed to give Most Favoured Nation (MFN) status to few sectors of Swiss economy. People who were involved in these negotiations in 2014 said the team agreed to give the MFN status in return of winning concessions on royalty, interest and shipping.
The third main reason given for renegotiating the deal was that the negotiating team had agreed to reduce the student fees. However, the sources said the exchange rate of Swiss Frank viz-a-viz US dollar had gone up and in real terms the value was retained while renegotiating the treaty.
Also, not more than two dozen Pakistani students study there at a given time and none was earning more than the agreed limit at that time, said the sources.
The decision to stop the process to sign the revised treaty could have also helped those whose names were mentioned in a report of the Federal Investigation Agency (FIA).
Published in The Express Tribune, March 22nd, 2017.
Pakistan and Switzerland have signed a revised pact to improve bilateral exchange of information regime regarding Swiss bank accounts. However, there are bleak chances of recovery of $200 billion hidden by Pakistanis in the Alpine State.
Switzerland’s Ambassador to Islamabad Marc George and the Federal Board of Revenue Chairman Dr Mohammad Irshad on Wednesday signed the revised Avoidance of Double Taxation Agreement.
Switzerland set to share details on Pakistan cash stashed in banks
The existing Avoidance of Double Taxation Agreement between the two countries was signed in 2005, and came into force in 2008. After signing, both the states will now undertake internal procedures for ratification of the deal and it will come into force in Pakistan on July 1, 2018.
According to a statement issued by the Finance Ministry, the revised agreement will open new vistas for cooperation, especially in the areas of exchange of information for tax purposes.
“The new treaty contains improvements with regard to the taxation of service fees and capital gains resulting from the sale of qualifying participants,” it added.
However, sources in the FBR told The Express Tribune that there is little hope that Pakistan will be able to get benefit from this treaty regarding the past transactions. The only benefit that the country will get is that in future Switzerland will not be among the safe havens for Pakistanis.
Sources said Pakistan lost past two years due to political expediency and the people who had stashed the money moved their fortunes to other safe havens by exploiting this opportunity. “They needed some time to withdraw money, which they got due to a delay in signing the deal after initialing it in 2014,” said one of the insiders.
In August 2014, Pakistan initialed the revised treaty with Switzerland, which would have allowed it to get information about $200 billion in early 2015. Surprisingly, in Sep 2014, the federal government decided to renegotiate the treaty despite initialing the agreement.
The decision to initial the treaty in Switzerland by Pakistan’s taxmen was not liked by those who were sitting at the helm of affairs in Islamabad. Lately, the government came up with the excuse that the negotiators did not have the mandate to sign the treaty. Moreover, the negotiating team gave up too much but got nothing in return. However, the treaty was blocked first. One of the reasons to block the treaty for two years was that the negotiating team reduced the dividend income tax rate to 5%.
Interestingly, Pakistan has signed 5% dividends rate with over a dozen countries. It signed 5% dividends rate with Spain and Czech Republic in 2016 – after the government frustrated the Swiss Treaty on the same ground.
Pakistani cash in Swiss banks pulled out?
Another allegation was that the negotiating team had agreed to give Most Favoured Nation (MFN) status to few sectors of Swiss economy. People who were involved in these negotiations in 2014 said the team agreed to give the MFN status in return of winning concessions on royalty, interest and shipping.
The third main reason given for renegotiating the deal was that the negotiating team had agreed to reduce the student fees. However, the sources said the exchange rate of Swiss Frank viz-a-viz US dollar had gone up and in real terms the value was retained while renegotiating the treaty.
Also, not more than two dozen Pakistani students study there at a given time and none was earning more than the agreed limit at that time, said the sources.
The decision to stop the process to sign the revised treaty could have also helped those whose names were mentioned in a report of the Federal Investigation Agency (FIA).
Published in The Express Tribune, March 22nd, 2017.