Pakistan and the US have decided to share intelligence on income tax and bank accounts of Pakistani citizens that have dual nationality.
The two countries will agree on one of three options laid down in Foreign Accounts Tax Compliance Act (FATCA) approved by US Congress and sign the proposed US-Pak agreement.
Well-placed official sources said the US Congress has approved FATCA so that US citizens are not able to evade tax on the income they earn in foreign countries.
The US Inland Revenue Service (IRS) ensures the implementation of FACTA and signs agreement with governments of countries where US citizens live and do business. It also enters into agreement with banks and financial institutions in these countries. The banks or financial institutions, which sign agreement with US IRS, are tipped as Party Foreign Financial Institutions (PFFI).
The first option among these three options is IGA-IB, under which the respective country and its financial institutions will provide information about bank accounts and income tax details. Likewise, the US IRS will also furnish such information to Federal Board of Revenue (FBR) and Pakistani IRS.
Under the second option of IGA-IB both the countries will be free to provide or refuse to provide any information with respect to any citizen.
Under the third option of banks or financial institutions will provide the information to the US IRS directly, or the IRS of FBR in Pakistan.
Banks and financial institutions in Pakistan, while following the advice of State Bank of Pakistan, have approached the US IRS to register with it under IGA-2 option. The IGA-IA option was beneficial for the government of Pakistan. The agreement has not been signed so far due to the adoption of two different options by the government of Pakistan and State Bank. However, a decision in this regard will be taken soon at the federal level.
As many as 36 Pakistani banks and financial institutions have been registered with the US IRS as PFFIs.
