Regularisation for the rich, demolition for the poor

Dr. Ikramul Haq

Pakistan—literally means ‘Land of the Pure’—is a unique country where the state patronises ‘corruption” (it includes amongst others tax evasion, money laundering, land grabbing, rent-seeking etc) for the rich and mighty. As for the weaker sections of society, even the higher judiciary shows a different yardstick—regularisation for the luxurious Grand Hayatt Tower and Banigala House, but demolition for the poor dwellers of Karachi’s Pakistan Quarters, small shopkeepers though they paid to the authorities whatever was demanded. It is not understandable that if regularisation for violating laws is kosher for those who matter in the land, why demolition and bulldozing for the less-privileged? This is certainly not the model of Riasat-e-Medina—it reminds of the ugly scenes of a despotic state that grabs lands belonging to the poor and benefits the rich.

The under declaration of immovable properties is a legally accepted practice. The Supreme Court, while annulling the order of Islamabad High Court, overlooked this aspect. The rich investors are guilty of understatement of value though not party to illegal lease, granted by Capital Development Authority (CDA). The successive governments—military and civilian alike—have been introducing amnesty schemes for tax evaders, majority of whom have been parking funds in real estate. The judiciary also has been endorsing such amnesties as in PLD 2018 SC 189 where the incumbent premier was declared sadiq and ameen even after availing Tax Amnesty Scheme of 2000 by paying tax of Rs. 240,000 for undeclared Flat No.2, 165 Draycott Avenue, London (purchased for UK £ 117,000 in 1983 and sold in April 2003 at a net amount of £690,307). He is also amongst the beneficiaries (many representing the most privileged members of society) of the recent favourable decision of Supreme Court in Grand Hayatt case. It is a test case for the Federal Board of Revenue (FBR) to investigate the source of investment of all the buyers of apartments in Grand Hayatt and acquire the same offering market price in terms of section 230F to the Income Tax Ordinance, 2001 as declared value is highly understated.

Since historically, the Legislature and Executive have been patronising tax evasion, it was argued that the judiciary could not be blamed for not punishing anybody for this crime. The question is why do parliamentarians approve and pass such undesirable laws/schemes and why the same are not declared ultra vires of the Constitution under Article 184(3) of the Constitution? For the last many decades, Pakistan is victim of money laundering, terrorism, tax evasion, corrupt practices, illegal capital outflows, all due to favourable laws/policies of appeasement by successive governments.

The real estate sector in Pakistan has been the most attractive shelter for untaxed/tainted money. The amendments made in Income Tax Ordinance, 2001  regarding withholding tax on purchase and sale of immovable property as per rates notified by FBR and taxation of capital gain on disposal were not aimed at countering black money. On the contrary, these were aimed at protecting and promoting land/developer mafia and ensuring that majority of the Pakistanis could not even dream of having a decent living. There exists permanent amnesty for owners of untaxed/tainted wealth under section 111(4) of the Income Tax Ordinance, 2001 giving them facility to pay 3% of difference of valuation per FBR’s rate and that of local authorities and no question would be asked about untaxed money!

It is an undeniable fact that every year billions are sent abroad and then parts of it is legitimised through fake inward remittances. Tax evaders get undeclared money whitened by paying just an extra 3% to 5% to any money exchange dealer to get remittances fixed in their names. This is an unprecedented facility for tax dodgers and criminals to launder their untaxed money under State patronage! Pakistan represents a classic case study of legitimising tax evasion by the state itself. The economy of the country has lost billions to corruption and tax evasion since 1991 when many money whitening schemes and Protection of Economic Reforms Act 1992 were introduced by the then government of Nawaz Sharif to legitimise his and others untaxed, undeclared money and assets—see details in books, Pakistan: From Hash to Heroin and Pakistan: Drug-trap to Debt-trap.

Even holders of public office prior to 2008 were allowed to take advantage of Foreign Assets (Declaration and Repatriation) Act, 2018 and Voluntary Declaration of Domestic Assets Act, 2018 passed under the garb of Money Bill in utter violation of Supreme Court in Workers Welfare Funds m/o Human Resources Development, Islamabad through Secretary and others v East Pakistan Chrome Tannery (Pvt.) Ltd through its GM (Finance), Lahore etc. and others [(2016) 114 TAX 385 (S.C. Pak.)], Mir Muhammad Idris v FOP PLD 2011 SC 213 and Sindh High Court Bar v FOP PLD 2009 SC 789. Strangely, the Supreme Court in Suo Muto Case No. 2 of 2018 has not taken note of it. Any public office holder who has availed any law to avoid tax should be disqualified for open admission of cheating the state. It just confirms how rulers in this country engineer laws for self-aggrandisement rendering as losers the poor and helpless of this Land of Pure, who are burdened with exorbitant indirect taxes and yet get nothing in return. The rich and mighty enjoy all luxuries of life at the expense of taxpayers whereas nearly 60% population is living below the poverty line.

Corruption in Pakistan is all pervasive. The ruling elites keep on singing the mantra of “patriotism” (sic) but indulge with impunity in rent-seeking, power politics, plundering of national wealth and organised crime. They consider it as their inherent right to deprive the poor of their fundamental rights. A lack of accountability and unprecedented tolerance towards corruption has made Pakistan a state controlled and run by ruthless forces representing money power. It is thus no wonder that democracy failed to take firm roots here even after seven decades of independence.

Democratisation of society is possible only through a credible system of accountability that works across the board with no sacred cows. If mighty segments of society— politicians, high-ranking state officials and judges—remain unaccountable, democratic dispensation, transparency and rule of law can never be established. The public has no access to tax declarations of public functionaries. Unfortunately, Pakistan has become a place where rampant and institutionalised corruption has become a way of life. Money from whatever source it comes” is the catchphrase in our society displacing what was termed as ‘morality’ in the yester years.

Tragically, with the free hand given to tax evaders and law violators by the state, Pakistan has become a free-for-all society. The general attitude is of helpless resignation, an acceptance of the defeatist principle that if one is to survive one must become part of the game. It then becomes dangerously akin to the rule of jungle—might is right, the weak are meant to fall out and the predators meant to prey freely.

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The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com; Twitter: @drikramulhaq