DefinePK

Abstract

Double Taxation Treaties (DTTs) are one of the most important instruments in international tax law for eliminating double taxation of income delivered across borders and thus stimulating cross-border cooperation. Given the chronic fiscal deficits of Pakistan, a developing economy, these treaties are important, at both ends—assist foreign direct investment (FDI) and also undermine collection of domestic revenue. This paper offers a critical examination of Pakistan’s double taxation treaties network, its alignment to the country’s broader fiscal needs, and exploitation of loopholes such as treaty shopping, and base erosion. Building on comparisons from other developing countries and more recent developments, including the OECD’s Multilateral Instrument (MLI), this article proposes having Pakistan restructure its treaty policy to protect its national interests without scaring away real foreign investment. Legal and institutional reforms, along with improved treaty renegotiation strategies and alignment with the norms of international anti-avoidance are recommended.