PHOTO: FILE
ISLAMABAD: The government on Friday informed the National Assembly that it is looking to make use of new Swiss laws to exchange confidential information about the ill-gotten funds from Pakistan stashed away in the clandestine Swiss banking industry.
On their part, Swiss authorities have expressed willingness to renegotiate the existing Pak-Swiss agreement on the Avoidance of Double Taxation Agreements (DTAs).
These developments were revealed by the Ministry of Finance in a written statement submitted in the National Assembly. The statement was in response to a query from Pakistan Tehreek-e-Insaf (PTI) lawmaker Dr Arif Alvi, who had asked whether the government had taken any steps to bring back the country’s assets deposited in Swiss banks.
The Ministry of Finance revealed that the federal government is seeking help of the new Swiss law known as The Restitution of Illicit Asset Act 2010 (RIAA), which now allows the Swiss government to exchange confidential information about money confidentially deposited in Swiss banks.
The ministry added that amending or renegotiating the existing Pak-Swiss Tax Treaty -- a process which has already been initiated -- will be a key step in reaping the benefits of the new Swiss laws.
The finance minister informed the assembly that a summary had been placed before the federal cabinet, seeking its approval for renegotiating the Pakistan-Switzerland Tax Treaty, which the cabinet approved in September 2013.
The minister added that as per procedure, Federal Board of Revenue (FBR) had taken up the matter with the Ministry of Foreign Affairs to approach the Swiss government, expressing Pakistan’s intent to renegotiate the existing Tax Treaty and to seek a suitable set of dates and choice of venue to start the negotiation at the earliest possible date.
The minister also mentioned that the Swiss authorities have expressed willingness to renegotiate the Tax Treaty and that the FBR has accepted the Swiss proposal to hold negotiations on August 26, 2014 to upgrade the existing Pak-Swiss Tax Treaty.
In reference to the Ministry of Foreign Affairs statement about the intended changes in the existing Pak-Swiss agreement on the Avoidance of Double Taxation Agreements (DTAs), the Embassy of Switzerland said in a letter that their authorities are ready to host a delegation and discuss possible amendments to the agreement.
The ministry said that the FBR delegation will leave for Switzerland in the last week of August to start negotiation.
Background
According to the finance ministry, Pakistan’s DTA with Switzerland, signed in 2005 and enforced in 2008, does include Article 26, which creates an obligation to exchange information relevant to the correct application of tax treaties. But in the case of this DTA it is deficient and does not enable either country to exchange meaningful tax information about their respective taxpayers.
It is assumed that Pakistani nationals have over $200 billion stashed in Swiss banks. One of the directors of Credit Suisse AG Bank has stated on record that $97 billion of worth of Pakistani capital is deposited in his bank alone.
Similarly, Micheline Calmy-Rey, the then Swiss foreign minister is reported to have put the figure of Pakistani money hidden in Switzerland at $200 billion — a statement that has not been contradicted.
In view of this matter, Pakistan may be a net creditor to the rest of the world in the sense that external assets, measured by the stock capital flight, far exceed external liabilities, as measured by the stock external debt.
However, the Ministry of Finance admits that the difference is that the liability belongs to the state and the assets belong to the non-compliant citizens and the situation needs immediate corrective action and reversal.
The ministry further states that it is of paramount importance that the existing Pakistan Switzerland DTA is renegotiated and upgraded in line with the latest trends in this all-important area of international cooperation.
COMMENTS (16)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
$200 billion means a whopping Rs.20 trillion while Pakistan's 2013-14 budget was Rs 3.5 Trillion...
Double taxation agreement should not be confused with ill-gotten monies. DTA is for those law abiding citizens who file and pay taxes to more than one country. Most rich Pakistanis unless they are on salary do not file their taxes even in one country let alone several countries. DTA is to protect those who live in one country but make money in another country and not to punish them with taxation by both countries. The ill gotten money simply sits in the bank and does not make any money till it is withdrawn. Even then with the current interest rates so low (less than 1% on fixed deposits in the West) there is not much income on the deposits. The DTA is to help taxpayers and not to penalize by taxing the same income at two different countries. Giving access to secret accounts is something that is not going to happen in the near future. Like the US, Pakistan is not a super power with big clout over world banking. Even in case of USA very few details of personal deposits are provided. It would be interesting to know the names of depositors as during the golden days of Gen Ayub Khan most of Pakistani economy was owned by 22 families. Of course they all slowly disappeared from the scene over time and monies to foreign banks. Gen Ayub and Gen Zia were lifelong salaried employs and from modest background but their families are billionaires and nobody questions them.
what about Kashmiri phelwan clad in lion cloth?
It might be fair to assume that recovery of these 'illegal' funds will probably not apply the same way to the Sharif family like it will to Zardari, Mansha and co.
This seems to be a great decision. India has done it long time ago and have also recovered the taxes from most of those who had managed to transfer the funds into their Swiss account. The major problem with us is that in our country the majority of people who have numbered accounts in Swiss Banks does not belong to Business or Industry, 90% of the names will either be politician, military personnel, powerful bureaucrats of the past and hard core criminals of underworld. They are simply too powerful for even Prime Minister to action against them. Remember even General Musharaf who at time seems to be very much serious and engaged the whole government machinery at all level for gathering information about the tax evaders Extensive survey was done for each and every property be it industrial, commercial or residential, even small one and two bed room apartments were surveyed, forms were distributed to the occupants and all details about property,bank,cash, number of cars and vehicles they own and other assets were gathered along with details of their monthly expenses, utility bills, name of school where their children study and so on. This information was collected for months and finally when the deadline expired, they put in jail only four or five bank defaulters who were really bankrupt had to face the music. Rest all is well.
I doubt if PML N will be able to do anything against those powerful people, I am afraid, the money spent for the recovery may go waste and be burden on the tax payers as usual. But lets pray and hope for the best.
Bring it in Babyyy!!!!
@usman786: "govt shd take steps to make this moeny HALAL so that Zardari & co donot shift it to Dubai " . Would this request apply to other businessmen and politicians as well? If I have not read wrongly, even IK has a residence in the Gulf and a tidy sum tucked away in some bank there.
This excellent step shows the sincerity of PMLN Government in restitution of illegal money from Switzerland. While Musharraf signed NRO to withdraw the corruption cases and PPP took the benefit of NRO, only PMLN has the moral courage to bring the public's money back!
Its a great initiative however that usual Jiyala Mirza around here would be like "This is tantamount to putting the grave of BB on trial and the "PCO JUDGE" is responsible for it" So basically Anyone trying to prevent loot and plunder of PPP is against democracy in Pakistan.And if the Qaatil league of yesterday becomes the Q league of today,that too is for the divine cause of Democracy.You really need a peanuts IQ to be a jiyala in these times!
Wont happen..all the corrupt politicians,bureaucracy and generals wont allow it.
Mr. zardari will be mopping his brow listening to this..
Announcing the news means nothing will happen. What would stop people from moving their assets to Caymans? As always, PMLN just making statements for public consumption, nothing concrete.
govt shd take steps to make this moeny HALAL so that Zardari & co donot shift it to Dubai
Why are we giving time to these people to withdraw their funds? Should have been implemented and then leaked information to press. May be, the politicians are the biggest depositors and they are trying to save their skin.
PML(N) is the best.
There are different rules for developing countries than there are for rich ones. America took on the Swiss banks and made them give up their secrets. In doing so it has opened a door for developing countries to attempt the same. But I think we all know that the same rules don't apply to us. America and the EU will stand by the Swiss if they refuse to cooperate with us. We should try but let's not get our hopes up.