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Avoidance of double taxation: Pakistan wants accords with all Saarc states

ISLAMABAD (December 31 2003): Pakistan is keen to have Conventions on Avoidance of Double Taxation with all Saarc member countries for promoting economic activities and strengthening bilateral relations with them.

A senior tax official told Business Recorder here on Tuesday that coming Saarc summit in Islamabad could play an important role in initiating informal negotiations on avoidance of double taxation agreements with those Saarc states with whom Pakistan has not yet signed conventions.

The government is in favour of carrying out agreements with all Saarc member states. Pakistan has inked avoidance of double taxation agreements with Sri Lanka, Nepal and Bangladesh. However, the tax authorities have shown willingness to sign conventions with India, Maldives and Bhutan as well.

Pakistan has signed initial agreement with Nepal, but it needs to be enforced with mutual consent of both countries. Similarly, Pakistan and India have specific agreement on air/sea traffic, but proper convention on avoidance of double taxation has still not been inked between the two sides.

He said that the government may not have formal meetings with their respective counterparts from Saarc countries pertaining to avoidance of double taxation during the summit. However, tax authorities are likely to convey prerequisites of such conventions to member countries for enhancing economic co-operation with Saarc member states.

The agreements would not only encourage investment among Saarc countries but would also be instrumental in enhancing trade activities.

Such conventions emphasise the concept of taxation on income of international business transactions in the home country of the recipient.

The purpose of agreement clearly defines the tax rules that would apply in case of cross-border business transactions. Although, Pakistan's trade with some countries is not significant, there still exists considerable potential for its expansion with room for reciprocal investments. There is need for the exploration of new markets and avenues for investment, he added.

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