OECD Convention

And why signing it was significant

Consequent upon making several amendments in the domestic income tax laws and peer reviews during the last two years that met the requirements of OECD, Pakistan has finally signed the Multilateral Convention on Mutual Administrative Assistance in tax matters. The Convention to which 80 countries are signatories is purported to facilitate global cooperation to combat tax evasion. The signing of the agreement testifies to Pakistan’s commitment to bring its tax system in line with the best global practices in the field of tax matters and be part of the multilateral fight against tax evasion. The federal cabinet had authorized the finance minister to sign the Convention on August 31, 2013. The agreement is likely to be implemented by the end of 2017 and become fully operational from 2018-19.

The Convention obligates the signatories to extend all possible forms of administrative cooperation to each other in the assessment and collection of taxes, with a view to combat tax avoidance and evasion. According to the Convention any member country can ask for information from the other member country concerning particular person or transactions which can be helpful in administration or enforcement of tax laws in the requesting country. The member countries shall also forward information without prior request to each other on reciprocal basis about which there is a knowledge that there may be a loss of tax in the other country or would give rise to an increase in tax liability in that country. The Convention also provides for automatic exchange of information that is relevant for administration or enforcement of their tax laws.

The signing of the Convention has removed the obstacles in getting information about untaxed money of Pakistani nationals stashed in foreign banks, including the money invested in the off-shore companies. The fact that the initiative was taken much before the Panama Leaks unfurled strengthens the credentials of the government in regards to dealing with ill-gotten wealth and tax evasion.  Our hyper active finance minister Ishaq Dar is the architect of this move and the reforms that made it possible for Pakistan to qualify for signing the Convention. Secretary General of OECD Angel Gurria congratulated Ishaq Dar for playing a pivotal role in bringing around economic turnaround in Pakistan economy as well as on signing the Convention. It is indeed a very bold and honest initiative of the government, more so of the finance minister as no government during the last seven decades dared to tread this territory. The non-existence of this kind of arrangement with international organisations and other countries facilitated parking of stolen money in the foreign banks or investment in off-shore companies with impunity. Therefore the signing of the Convention is a very significant development that would prevent the flight of money from the country as well as discourage the detestable practice of tax evasion in the future, besides enabling Pakistan to seek and get information about the already filched money and its destination, with the possibility of its repatriation to Pakistan.

The convention is the most comprehensive global instrument against off-shore tax evasion and could become increasingly relevant in regards to Panama Leaks probe. Under the global pressure even Panama government has announced to sign the OECD Convention which will make it easier for an incisive probe into the Panama Leaks. It has surely cleared the impediments to such an inquiry and given a sound legal footing to Pakistan to have the matter investigated thoroughly. It is pertinent to note that the government of Pakistan has taken this step before other countries which testifies its honesty of purpose in dealing with corruption and corrupt practices concerning tax evasion and off-shore companies.

In regards to the formation of a judicial commission to probe Panama Leaks, the government has also introduced The Pakistan Commissions of Inquiry Bill 2016 in the parliament. The Bill has been prepared in the light of SC observations on government request for the formation of a judicial commission to probe Panama Leaks that any commission formed under Commission of Inquiry Act 1956 would have limited powers and scope. The Bill will enable the government to set up a powerful Commission to investigate mega corruption cases. The government has brought its own comprehensive bill after failure of the TORs committee to agree on terms of reference. The opposition though has vowed to oppose it and thwart its passage maintaining that it was a save the Nawaz family Bill. Ishaq Dar has also been a moving force behind the drafting and tabling of this bill in the parliament. The Bill, contrary to the attempts of the opposition parties to make the process prime minister – specific, aims at dealing with corruption at a much broader level, encompassing all kinds of shady transactions and corruption. It will ensure across the board accountability of all those who have been named in the Panama Leaks.

I am afraid the stance of the opposition on the issue is wrong. Their insistence on probe against the Prime Minister, though his name is not mentioned in Panama Leaks makes no sense. If there has to be a probe into Panama Leaks then it has to be against all those who have been named in them. The country also needs to prevent and plug the avenues of future corruption and in case of any such eventuality be in a position to ferret out the truth in all kinds of corruption cases. That is how an effective mechanism can be evolved to curb the menace of corruption. Nobody in his right mind can dispute this proposition. The decision by the opposition benches to oppose the bill indicates that they are actually not interested in unearthing the truth about Panama Leaks and curbing corruption but their only aim is to have a swipe at the prime minister and his family. The foregoing initiatives of the government prove beyond an iota of doubt that it was sincere and honest about not only probing Panama Leaks but also tackling all types of corruption. It has an enviable track record in this respect. The consecutive annual reports of Transparency International have corroborated a decline in corruption since the formation of the PML-N government, a distinction never earned by any government.

There is no denying the fact that the rampant corruption is the bane of our socio-economic development and it is absolutely imperative to tackle this menace on war footings. If the opposition is really sincere in eliminating corruption, then they have to prove their credentials by joining hands with the government to bring in a comprehensive law against corruption that ensures across the board accountability of politicians, generals, judges, bureaucrats and all those vested with public authority and also provides for retrieval of the looted public money and the redemption of written off bank loans. Do they have the courage and honesty to do that being the beneficiaries of the culture of graft and entitlement, remains a million dollar question?