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Forgotten suo motu case

Dr. Ikramul Haq

It has been common knowledge for years that a large number of Pakistani citizens, who are residents of Pakistan and are maintaining accounts in foreign countries without disclosing the same to the authorities competent under the laws of Pakistan or paying taxes on the same in accordance with law. Prima facie, it appears that such money is siphoned off without the payment of taxes through illegal channels and represents either ill-gotten gains or kickbacks from public contracts. Such money creates gross disproportion, inequality and disparity in the society, which warps economic activity and growth, and constitutes plunder and theft of national wealth”—Supreme Court of Pakistan

The Supreme Court of Pakistan (SCP) made above observations on February 1, 2018 taking it as Suo Motu Case No. 2 of 2018, which is still pending for adjudication. The last hearing in the matter was held on January 14, 2019 as per website of SCP. The purpose of this case as per order of June 12, 2018 [PLD 2018 Supreme Court 686] wasretrieving of looted wealth and/or untaxed assets stashed abroad, exposing and punishing the culprits. On the contrary, the culprits were given unprecedented immunities and assured complete confidentiality through Voluntary Declaration of Domestic Assets Ordinance, 2018 and Assets Declaration Ordinance, 2019, first by the government of Pakistan Muslims League (Nawaz)—PMLN—and then by the coalition Government of Pakistan Tehreek-i-Insaf (PTI). The National Assembly later on passed both as Money Bills in Finance Act, 2018 and 2019, respectively.   

By providing complete and absolute confidentiality, the legislators debarred the authorities investigating proceeds of crime/corruption rendering them powerless. Through these laws, tax evaders and even many ex-public office holders secured immunity. Later, the plunderers of national wealth/tax evaders got further relief when the PTI Government made the National Accountability Bureau (NAB) toothless through National Accountability (Amendment) Ordinance, 2019.

The purpose of establishing Special Asset Recovery Unit (ARU) by Prime Minister in October 2018 became meaningless because of Assets Declaration Act, 2019, causing loss of billions to the national exchequer. It may be recalled that while addressing a Press conference on October 4, 2018, Special Assistant to Prime Minister on Accountability, claimed that details of more than 10,000 properties owned by Pakistanis were traced in Dubai and England and declared it “a huge success”. He said:  “We have formed a task force which will ensure the money sent abroad is brought back“. Where is that recovery? The reality is that the Government of PTI instead of retrieving assets, caused loss of billions to the national exchequer as was done by PMLN. By paying just peanuts, tax evaders are now retaining the assets with them both inside and outside Pakistan.

The Director General of Directorate of International Taxes of Federal Board of Revenue (FBR), Muhammad Ashfaq, on November 7, 2019 admitted before the Standing Committee on Finance & Taxation of National Assembly that governments of PTI and the PMLN in their amnesty schemes of 2018 and 2019, respectively, extended benefit of Rs. 61.4 billion to 191 billionaires who were caught owning undeclared offshore assets. While he did not disclose the names of the beneficiaries (as both the governments of PTI and PMLN provided legal cover to keep their names secret), it was admitted by Mr. Ashfaq that definite information was available against them under Automatic Exchange of Information (AEOI) initiative of the Organisation for Economic Cooperation and Development (OECD).

As many as 135 persons, named in the OECD database, availed the 2018 tax amnesty scheme and declared Rs. 62.4 billion in assets. They paid only Rs. 2.9 billion whereas, their actual liabilities without the tax amnesty could have been Rs. 43.7 billion, thus getting a relief of Rs. 40.8 billion. About 56 people, whose data was shared by the OECD, availed the 2019 amnesty scheme and declared Rs. 31.8 billion worth of assets. They paid only Rs. 1.7 billion and got a relief of Rs. 20.6 billion. Of the remaining cases, Mr. Ashfaq told the Standing Committee that FBR assessed 115 cases, raised demand of Rs. 4 billion and recovered Rs. 1 billion. The total tax collection in 325 cases against $ 5.5 billion worth of foreign assets was only Rs. 5.6 billion or 0.64% of the traced assets.

The PTI Government earlier had been proudly taking credit that it had received information of around 152,000 bank accounts owned by 57,450 Pakistani nationals, having $7.5 billion in bank deposits. Bulk of this information was received much before PTI came into power. Premier Imran Khan, before giving amnesty, repeatedly expressed determination to bring back the looted and untaxed money. Later, he succumbed before the forces of loot/plunder/tax evasion.

The tall claims of Imran Khan, especially of reopening the cases of beneficiaries of asset whitening scheme of PMLN, were exposed by Mr. Ashfaq who told the House Committee of National Assembly that out of 191 persons who availed the 2018 and 2019 asset-whitening schemes, tax received by FBR was only Rs. 4.6 billion against declared assets of Rs. 94.2 billion. Thus these 191 people paid on average 4.9% of the value of assets in taxes!

It was conceded by Chairman FBR that they could have recovered 70% [as per provisions of Income Tax Ordinance 2001 on a concealed asset, there is a maximum income tax of 35% along with 100% penalty, bringing the total tax liability to 70%] of the assets. Tragically, the governments of PTI and PMLN settled the evasion at just 2% to 4%, remarked Asad Umar, former Finance Minister and at that time Chairman of the Standing Committee, the position he left after becoming Minister for Planning, Development & Special Initiatives. He added: “This tells why all political parties love to give tax amnesty schemes and also confirms the elite capture of Pakistan’s economy and politics”. He boldly criticised all, including his own party, but this he should have told to the Prime Minister when he accorded permission for Assets Declaration Ordinance, 2019, promulgated by the President on May 15, 2019.

The Supreme Court, in exercise of powers under Article 184(3) of the Constitution directed all State agencies including IB, ISI, MI and FIA to share all requisite information available with them with it. However, the PMLN and PTI Governments flouted these instructions by extending secrecy clauses in the asset-whitening schemes.

It is time that the SCP in pending Suo Motu Case No. 2 of 2018 orders probe for extending complete confidentiality to tax evaders and plunderers of national wealth through Money Bills, in utter violation of the Constitution and its judgements, 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. The National Assembly passed both the laws unconstitutionally causing loss of billions of rupees that could have been utilised to look after millions living below the poverty line.    


The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS).

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