FBR again asks UAE to share details of Pak Iqama holders

ISLAMABAD: The Federal Board of Revenue (FBR) on Monday again asked the UAE for sharing details of Pakistani Iqama holders and warned that if the required information was not shared, Pakistan will be forced to scrap avoidance of double taxation agreement.

The FBR on Monday announced officially that they dispatched fresh official communication to the Ministry of Finance, UAE, and again asked the authorities to furnish details of those Pakistanis who possessed Iqama. These people have evaded taxes and put their money in the UAE as they had also deceived UAE for keeping their untaxed wealth, the letter further states.

The letter further stated that exchange of information under OECD framework was aimed at bringing transparency in international taxation system and it was also meant to place an effective mechanism against tax evasion.

Despite sending them reminders, the UAE authorities, according to official communication, did not reply due to which no progress could be achieved in last few months. The official communication sent out to UAE again stressed the need for sharing the required information otherwise Pakistan would be forced to scrap the avoidance of double taxation agreement with UAE.

Earlier, FBR Chairman Shabbar Zaidi wrote letter to UAE in October 28, 2019 and asked for devising mechanism to share details of Pakistanis who are hiding behind Iqama based residential status to evade taxes.

In his letter, he had invited attention yet once again towards scheme like Residence by Investment (RCI), which then are used to circumvent reporting of bank and financial account information under the OECD’s Common Reporting Standard (CRS) framework.

“The issue is of critical importance to us as Pakistan is not being able to access actionable bank account information in respect of our tax-resident persons who are purportedly hiding behind UAE-Iqama based residential status”, the FBR chairman stated in his letter. The chairman added that tax evasion through such elitist ploys adversely affects the perception of the common citizen and there is professed commitment and resolve at the highest level of governance apparatus to address this issue on a permanent footing.

Earlier, Pakistan had also requested the UAE authorities to share details of those 5,000 to 14,000 Pakistanis who had invested into properties worth billions of dollars. It is yet to see how both sides decided to move ahead on establishing mutual cooperation for getting benefits.

FBR chairman also recalled that in the recent meeting on Exchange of Information between Pakistan and the UAE held on 09-10-2019 in Dubai, the issue was briefly deliberated upon with a commitment by the Ministry of Finance, UAE to come up with a formal response in due course, which is still awaited.

Given the significance of the matter, the FBR chairman reminded that the issue was also raised by Pakistan’s Finance Minister with the OECD - the sponsoring organisation of CRS framework to look into the matter and come up with a solution along full spectrum.

The OECD has responded that they are tackling the issue with a two-pronged approach at jurisdiction level, through implementation of Spontaneous Exchange of Information (SEOI) mechanism to intercede in respect of potentially high risk RBI programmes, and at Financial Institution level, through publication of RBI due-diligence guidelines. The OECD has also recommended that “in future, where a jurisdiction has adopted the SEOI mechanism, the Pakistani competent authority should be made aware in cases where its tax-residents obtains citizenship or residence status via a foreign CBI/RBI programme. “We understand that the UAE authorities are grappled with the matter at their own end too. In view of the above, he suggests an urgent meeting to devise modalities to overcome the RBI problem including operationalization of the SEOI mechanism in this particular context, between Pakistan and UAE competent authorities, either in Islamabad or the UAE in the 1st half of November, 2019.”

It is relevant to mention here that Iqama holders obtained residence in the UAE due to which their accounts/balances and other tax-related information is not shared with Pakistani side.

Diplomatic circles, who are expert in policies of the Middle East states, when contactied said that these countries are committed and will provide only that information that does not affect the investors’ interest. They said that these countries will follow the international laws.

They said that these countries always watch the interest of their investors, and their relations with other countries are also based on principles. They said that these states never do anything that can shatter confidence of thier investors.

Under OECD, Pakistan gets information from 29 jurisdictions and now it increased to 44 countries but the data obtained from the UAE was found highly insignificant. The Residence by Investment (RBI) and Citizenship by Investment (CBI) schemes are allegedly misused by potential tax-evaders from all over the world to circumvent reporting of bank and financial account information under the Common Reporting Standards (CRS) thereby putting at risk the very integrity of the system.