Avoidance of double-taxation treaty with UAE in jeopardy

Published: December 10, 2019


ISLAMABAD: Pakistan on Monday threatened to terminate avoidance of double-taxation treaty with the UAE due to its continued non-cooperation in regard to sharing wealth details of Pakistanis holding residence visa of Dubai.

The UAE’s persistent silence on the Federal Board of Revenue’s efforts to develop a robust framework for sharing of structured information of Pakistani Iqama-holders has not been productive so far, it stated in a strongly-worded hand-out issued late Monday evening.

The hand-out was issued after the FBR wrote a letter to the UAE’s Ministry of Finance, reminding it to fulfill its international obligations under the charter of the Organisation for Economic Cooperation and Development.

The FBR requested the UAE to provide a well-laid out roadmap on the UAE Iqama-holders’ information, according to the letter contents.

“Alternatively, Pakistan would be constrained to seriously consider rolling out appropriate measures, including termination of the Pakistan-UAE avoidance of Double Taxation Agreement at an early date,” said the FBR.

The issue of sharing details of the Pakistani nationals, who also hold the UAE residence visa, known as Iqama, under its Residence by Investment (RBI) policy remains unresolved for the last few years.

Iqama is a residence visa meant for the nationals those countries that are outside the Gulf Cooperation Council.

Despite being signatory to the OECD convention, the UAE was reluctant to provide information of bank accounts and properties of those Pakistanis who also hold Iqama.

Pakistan gave repeated reminders to the UAE authorities, in addition to seeking cooperation of OECD Secretary General in convincing the Gulf nation to cooperate with Islamabad.

In a letter to OECD Secretary General, Hafeez Sheikh, Adviser to the PM on Finance, stated that Pakistan was one of the worst-hit nations by the RBI and the CBI initiatives, as information about some of the most revenue-potential Pakistan tax-resident persons is blocked by some countries, citing regulations that bar sharing of such information with Pakistan.

The best inter-nation relationships are mutually responsive, symbiotic and empathetic, and are the product of superior diplomatic wisdom, the FBR letter stated.

The tax authorities believe that there are many Pakistani nationals who live in Pakistan but have obtained the UAE Iqama through its Residence by Investment (RBI) initiative and have parked tax-evaded and ill-gotten money there.

In November last year, the Supreme Court was informed by the Federal Investigation Agency that 220 new individuals had been found holding 656 properties in the UAE.

Through its latest reminder, the FBR again requested the Ministry of Finance of United Arab Emirates (UAE) to provide the information of all those Pakistanis who have sought UAE Iqama under Residence by Investment (RBI) Schemes.

The FBR in its letter to the UAE’s Ministry of Finance has stated that such delinquent Pakistan tax resident persons have not only siphoned off funds out of Pakistan, parked them in UAE but also effectively circumvented the OECD-sponsored CRS exchange of bank and financial account information.

UAE’s Ministry of Finance has not responded to all earlier written requests of the FBR in this regard so far. The FBR letter further states that the automatic exchange of information framework, in essence, was conceived and implemented to put up a well-coordinated and concerted global fight against organised tax theft and to inject transparency in the international taxes system.

The FBR said that in the Pakistan-UAE meeting on Exchange of Information held in Dubai on October 9-10, 2019, a commitment was made to come up with a detailed formal response. “However, not only that no reply whatsoever has been received from UAE, but also that a few subsequent rejoinders issued by FBR went unanswered, even unacknowledged”.

The wording of the FBR’s press note suggests its irritation with the UAE authorities. Traditionally, Pakistan has avoided putting the UAE on a notice or giving it a warning. Islamabad has remained reluctant to go public against the UAE on the issue of non-disbursement of $800 million outstanding tranches by the Etisalat on account of PTCL privatisation.

In October’s meeting, it had been agreed by both the sides that the UAE will give weekly updates about the people who hold properties in Dubai. In order to expedite the information, Pakistani authorities would provide more details about its 500 nationals in an effort to gain access to the real owners of the properties. The UAE government will also seek help of its largest real estate developer aimed at identifying the people.

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