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Huzaima Bukhari & 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 in Suo Motu Case No. 2 of 2018: Regarding Maintaining of Foreign Accounts by Pakistani Citizens Without Disclosing the Same/Paying Taxes
Amid a global squeeze on tax evasion, money laundering and blatant outflows of capital, Switzerland’s 11 largest banks, housing nearly US$7 trillion of the world’s total offshore liquidity stock of US$42 trillion, has remitted US$2 trillion so far to the various countries. Switzerland has traditionally been the oldest, the most formidable and the most popular secret banking jurisdiction, attracting massive sums of tax-evaded money from across the world into its banks with numbered-accounts. Since 2009, the US and EU have consistently been pressing Switzerland and other tax havens to allow international tax administrations to track illegal funds parked in their secretive banks. Pakistan has yet to take any concrete measures in this direction—Retrieving Swiss Money, Business Recorder, July 25, 2014.
On February 2, 2022, Mr. Justice Umar Ata Bandial took oath as 28th Chief Justice of Pakistan. It is time to remind that everyone has forgotten what the Supreme Court desired in Suo Muto Case No. 2 of 2018, started on February 1, 2018, and what happened thereafter. The last hearing in this case was held on January 14, 2019 as per website of Supreme Court of Pakistan. The purpose of suo muto case [see order dated June 12, 2018 in PLD 2018 Supreme Court 686 andobservations in the recent judgement: https://www.supremecourt.gov.pk/downloads_judgements/const.p._17_2019_detailed_reasoning.pdf] was retrieving the looted wealth and untaxed assets stashed abroad, exposing and punishing the culprits. On the contrary, the culprits were awarded unprecedented immunities and amnesties and assured complete confidentiality through unconstitutional laws, first by the government of Pakistan Muslim League (Nawaz)—[PMLN] and then by the coalition Government of Pakistan Tehreek-i-Insaf (PTI). Though these laws were ultra vires of the Constitution of the Islamic Republic of Pakistan, 1973 [“the Constitution”], shockingly, the Supreme Court has not taken any action during the pendency of Suo Muto Case No. 2 of 2018 wherein old pending Constitutional Petition No.72 of 2011, filed by Muhammad Ali Durrani, ex-Minister and former Senator, was also attached involving some common issues.
The recent exposure by Suisse Secrets has once again proved that the influential figures in Pakistan—men in khaki and mufti—can undermine the state institutions with impunity. One such story is reported in the Press as under:
“Credit Suisse Leaks have revealed that one of Pakistan’s wealthiest businessmen, Mian Mohammad Mansha, appears to have had a shared bank account with a phantom company that helped finance the sale of a five-star hotel in London, United Kingdom.
While Mansha has always maintained that he had no involvement in the purchase of a five-star London hotel that is being investigated for alleged forgery, tax fraud, and money laundering, bank documents were collected by the Organized Crime and Corruption Reporting Project (OCCRP) and its Suisse Secrets partners that linked him to the hotel purchase.
To recall, Pakistani tax authorities began investigating Mansha and other members of his family in 2015 after discovering anomalies in the purchase of the historic St. James Hotel & Club for roughly $50 million in November 2010.
Mansha has always claimed that he has no stake in the hotel, which is held by his sons Umer and Hassan, as well as his daughter-in-law Ammil Raza Mansha. They claimed to have borrowed $22 million from an unidentified offshore company in the British Virgin Islands and $20 million from a business in the British Crown dependent of Guernsey to fund the purchase. The Guernsey corporation, according to the Manshas, was called Easy Investments Limited.
According to court documents, Hassan Mansha signed both loan agreements, which were attested by Muazzam Rashid, an assistant manager at a Mansha family-owned business in Pakistan.
After learning that the Mansha family had siphoned funds out of the nation without declaring them legally, the Federal Board of Revenue (FBR) probed the matter. However, the investigation quickly came to a halt since the tax machinery was unable to find much about the offshore entities that allegedly lent the money.
Officials in the British Virgin Islands refused to offer any information regarding Avendale Enterprises Limited, a company established there that had lent the “Manshas” $22 million. Officials in Guernsey were more cooperative, but when asked about Easy Investments Limited, their response raised red flags. They claimed that there was no record of the corporation being registered on the island at any time. There was no sign of it anyplace else in the world.
The FBR said in court papers filed in 2020 that the lack of a registration for Easy Investments in Guernsey made the multimillion-dollar loan suspicious and prompted “serious questions regarding the veracity of the claims of members of the Mansha family.”
According to data from Suisse Secrets, Mansha may have had a cordial relationship with Easy Investments. In 2005, a firm controlled by Mansha and his wife, Naz, opened a Credit Suisse bank account with Easy Investments Limited as a co-holder.
The account, which was closed in 2013, had a peak balance of over 18.5 million Swiss francs (approximately $20 million) in 2012, more than a year after the hotel deal was finalized.
However, Suisse Secrets data does not include the jurisdictions where the firms are incorporated, and the report reckons that it is impossible to verify that the company listed on the bank account is the same as the offshore that gave the Mansha family money. The OCCRP report details that a handful of Easy Investments Limited firms registered in various jurisdictions across the world at the time of the deal, but their owners could not be identified, and they did not appear to be connected to the deal.
However, the new information concerning Easy Investments could alter the trajectory of these investigations. A tax official who worked on the case told the OCCRP that if Mansha covertly controlled the company and lied to investigators about it, he might face substantial financial penalties and even perjury charges.
Mian Mansha recently resigned as Chairman of the Nishat Group, which was created in 1951 by his father and close relatives. He was the first Pakistani to join Forbes’ list of billionaires in 2010.
Mansha’s businesses grew in the 1990s when he purchased holdings in two cement companies and was part of the group that bought Muslim Commercial Bank, thanks to a privatization effort led by ex-Prime Minister Mian Nawaz Sharif. It is pertinent to mention that the bank’s acquisition continues to be a source of controversy. Although Mansha’s bid was not the highest, he was reportedly allowed to match the top bid to win the auction. A 2002 NAB investigation in this regard remains open to this day”.
It is worthwhile to mention that the tall claims of Premier Imran Khan, especially of reopening the cases of beneficiaries of asset whitening scheme of PMLN were exposed by Dr. Mohammad Ashfaq, presently Chairman of Federal Board of Revenue (FBR), 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 the then Chairman FBR, Syed Muhammad Shabbar Zaidi, 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 and further amount to settled for condonation of prosecution that under section 192A of the Income Tax Ordinance, 2001 as an offence is punishable on conviction with fine of Rs. 500,000 or more and imprisonment up to two years or with both. Tragically, the governments of PTI and PMLN settled the matter at just 2-4%, remarked Asad Umar, former Finance Minister of the PTI and Chairman of the Standing Committee as he was at that time—now the Minister for Planning. He added: “This tells why all political parties love to give tax amnesty schemes and also shows the elite capture of Pakistan’s economy and politics”.
During the hearing on November 7, 2019, members of the Standing Committee of National Assembly were of the view that the beneficiaries of the schemes illegally took funds abroad. However, Syed Muhammad Shabbar Zaidi defended them claiming that “$7.5 billion went out through legal channels under the Foreign Currency Accounts Ordinance of 2001 that at the material time allowed dollar buying from the market and their remittance abroad through bank accounts”. This contention of Shabbar Zaidi was contested by Asad Umar who said: “No individual can buy assets abroad without obtaining permission of SBP or ECC, as the case may be” and added: “I am not talking about your former clients of AF Ferguson, whom you had facilitated for placement of funds abroad with the help of legal lacunas”.
Asad Umar claimed that the stance of State Bank of Pakistan on remitting money abroad without seeking permission was different from that of the FBR historically. He was referring to a statement [SBP denies giving go-ahead for $75 million investment, The Express Tribune, November 25, 2015] given by Irfan Ali, Director Banking of the State Bank of Pakistan before the Senate’s Standing Committee on Finance and Revenue, November 24, 2015 that the central Bank neither gave any permission nor initiated a case for approval of the Economic Coordination Committee (ECC) to a billionaire for remitting $75 million for the purchase of Saint James’s Hotel in London. Asad Umar once again emphasised that there was a need to shut this door by ending ambiguity. Now linkage to this case has resurfaced in Suisse Secrets as quoted above.
Way back in 2013, the Senate of Pakistan in its recommendations to National Assembly for improving Finance Bill 2013-14 specifically emphasised the need for a law that could enable State Bank of Pakistan (SBP) to obtain details about money held by Pakistanis in overseas accounts. The National Assembly that alone has power to pass Money Bill under the Constitution did not pay any heed to it. After five years, the issue was taken up by the Supreme Court of Pakistan in Suo Motu Case No. 2 of 2018, which is still pending. The perpetual inaction on the part of state institutions, mainly Parliament to remove protective laws, in the wake of Panama, Bahamas and Paradise Papers ultimately compelled the highest court of the country to take cognizance of the matter but it remains undecided till today.
As expected, SBP, FBR, Federal Investigation Agency (FIA), Securities & Exchange Commission of Pakistan (SECP) etc in the very first hearing on February 15, 2018 showed “helplessness” in retrieving untaxed money and stolen assets claiming that the existing laws are the main impediment in their way.
The question is that why they have never suggested to the government to plug the loopholes in the existing laws and enact the laws to counter the loss caused to the national exchequer by undesirable outward remittances? What was the role of Parliament in the bleeding of national economy due to unlawful flight of money? All this was discussed in detail in an op-ed, ‘Suo motu on foreign assets’, Business Recorder, February 9, 2018.
It is pertinent to mention that the Chairman of FBR was to lead a delegation to Switzerland from August 26-28, 2014 to “re-negotiate and upgrade treaty on Avoidance of Double Taxation [DTA] with Switzerland to retrieve and tax undeclared money deposited in the Swiss banks by the Pakistani nationals”. At the last minute, he cancelled his programme and sent a junior officer, now Chairman of FBR. The aim was allegedly to sabotage the effort to get information from Swiss government and retrieve the tax (reported in ‘Pakistani cash in Swiss banks pulled out’, The Express Tribune, February 22, 2017.
Later Pakistan revised Convention on Avoidance of Double Taxation and Fiscal Evasion (DTA) with Switzerland facilitating exchange of information. In a hearing before the Senate Standing Committee on Finance on January 9, 2018, the spokesman of FBR said that “information about old cases cannot be obtained” under the revised convention “but we will try our level best to get past information as well, specifically bank accounts details of Pakistanis held in Swiss banks”. The FBR neither made public nor submitted before the Supreme Court how many requests were made under the revised DTA. The FBR’s spokesman told the Senate: “We have requested the Swiss government to include name of Pakistan in the list of countries for exchange of information, which has been endorsed by the Swiss Parliament.” Strangely, the government took such a long time to renegotiate revised DTA with Switzerland and even after signing the same made no progress in getting details of money stashed there what to speak of retrieving the lost revenues and now Suisse Secrets has exposed the magnitude of the assets stashed in Swiss banks.
In 2010, in an article, [With the help of Swiss, Dawn, October 11, 2010], it was pointed out by these contributors that “nearer home, the Indian government has already taken steps to recover the hidden, ill-gotten wealth of its citizens lying in Swiss banks. Ever since reports emerged of Indians having accounts in tax havens like Liechtenstein and the success of governments like the US in accessing these accounts, New Delhi has been working zealously to retrieve funds from the Swiss banks”. It was suggested that, “Before approaching the Swiss authorities, the Pakistani government should introduce asset-seizure legislation to confiscate all undeclared and untaxed assets. For money lying in Swiss banks, information can easily be obtained from Switzerland”.
As expected, the above suggestion went unnoticed as far as our governments and Parliament were concerned. In the wake of publication of above article, FBR moved a summary for re-negotiating the DTA with Switzerland, but then coalition government did not respond. At least three summaries moved from time to time were swept under the carpet. The reason for this was discussed in detail in ‘Retrieving Swiss money’, Business Recorder, July 25, 2014. In the meantime, former President, Asif Ali Zardari, conveniently got his $60 million moved from the Swiss banks and never told the nation from where the said money came and how much tax was paid on it in Pakistan or elsewhere. Till today, no action has been taken by FBR or NAB against him. Rather the case in NAB was dismissed for want of certified copies. Interestingly there was no denial that he did not own the money as is the case with Nawaz Sharif who has admitted possessing properties through offshore companies but refuses to reveal the money trail.
The Ministry of Finance in a written reply told the National Assembly on March 9, 2014 that the government “was engaging with Swiss authorities to get to the money, hidden away by various Pakistani nationals”. In a detailed response to a question raised by Dr. Arif Alvi of the Pakistan Tahreek-i-Insaf (PTI), the Ministry quoted statements by a Swiss banker and a former Swiss government minister: “One of the directors of Credit Suisse AG stated on the record that $97 billion worth of Pakistani capital was deposited only in his bank.” This was discussed in detail in Our Swiss dilemma, The News on Sunday [Political Economy], August 17, 2014. It was noted that “the governments in Pakistan, unfortunately, are not taking any action against tax cheats at home. Even private efforts to invoke extraordinary jurisdiction of Supreme Court and High Courts to retrieve looted wealth and untaxed money have not been fruitful. The Supreme Court in 2012 and 2013 declared the petitions filed by some individuals as “non-maintainable.”
The Senate Committee on Finance, Revenue and Economic Affairs on July 28, 2015 raised the issue of foreign remittance for the purchase of a hotel in London and asked SBP about the prevailing regulations and limitations of outward remittances for investment abroad. It is claimed in a report that SBP in its letter dated August 24, 2015 to the Senate committee stated that the request for the investment abroad by Pakistani person was processed and considered in terms of applicable laws and policies. “However, any investment abroad of US $5 million or above required approval of Economic Coordination Committee”. This was not conveyed by SBP to Supreme Court in its reply in Suo Motu Case No. 2 of 2018. The disclosure now in Credit Suisse Leaks Exposes Mian Mansha’s Alleged Link to “Hidden” London Hotel Sale [propakistani, February 24, 2022] is quite shocking.
In the wake of Panama, Bahamas, Paradise leaks and Suisse Secrets, the issue of tax avoidance by keeping accounts in tax havens has become a highly charged political issue in the world. In our case we are begging for loans and bailouts from foreign lenders and donors while trillions untaxed are lying abroad. Whether our Prime Minister will fulfill promise to retrieve and tax the gargantuan hidden funds or offer yet another amnesty only time will tell. If he takes action in the remaining period of his tenure, which is ending in 2023, the entire nation will be indebted to him.
In The Panama Papers, the leaked data covered nearly 40 years, from the late 1970s throughout the end of 2015. It exposed a never-before-seen view inside the offshore world—providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues. Then came Pandora Papers—the largest investigation in the history of journalism, according to International Consortium of Investigative Journalists (ICIJ), “exposes a shadow financial system that benefits the world’s most rich and powerful. This sums up the journey from Panama to Pandora Leaks.
We wrote extensively about all the leaks by ICIJ and even prior to that as to how the offshore industry has been providing services for legal as well as illicit purposes to its clients. All the leaks elucidate that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands (BVI), Panama and other offshore havens. The Indians signed a bilateral agreement with BVI in 2011 but our successive governments failed to do it as highlighted in ‘Probing Swiss accounts’, Business Recorder, August 15, 2014 and ‘The games politicians play’, The News, March 26, 2017.
Tackling the dual menaces of unlawful outflows, money laundering and tax evasion is not just our peculiar problem. Many governments of the world are facing challenges of checking flight of untaxed money. Before taking oath of office, Joe Biden called out corporate corruption as a threat to national security. Biden wrote in Foreign Policy: “I will lead efforts internationally to bring transparency to the global financial system, go after illicit tax havens, seize stolen assets, and make it more difficult for leaders who steal from their people to hide behind anonymous front companies”. An article in The Nation, titled, How Tax Haven States Enable Billionaires to Hide Trillions,sums up the ugly legacy of offshore maze—read the latest article, where one of us is a coauthor: The Pandora’s box of our ugly offshore legacy, Global Village Space, October 5, 2021.
Economists, tax and financial professionals, accountants, lawyers, academics and writers of the world have a consensus that tax is the foundation of good government and key to the wealth or poverty of nations. But this foundation till today is under threat by tax havens as alleged in all the leaks by ICIJ and now by Organized Crime and Corruption Reporting Project (OCCRP) .
In The Panama Papers, allegation about the three-times elected premier and family was: “Nescol Limited and Nielson Holdings Limited were incorporated in BVI in 1993 and 1994, respectively, and were held by one bearer share each. In February 2006, Mariam Safdar signed a resolution of Nescol Limited as the “sole (bearer) shareholder. MF was appointed as the registered agent through Minerva Trust which described Mariam Safdar as the beneficial owner of both companies. Following queries from the Financial Investigation Agency in 2012, MF invoked the Anti-Money Laundering and Terrorist Financing Code of Practice (2008) to grill Minerva for information about Nescol and Nielson. In June 2012, Minerva Trust & Corporate Services Ltd revealed that both companies “owned a UK property each” —16 and 17 Avenfield House—and were “owned by the same beneficial owner Mariam Safdar.”
The important question was why these properties did not find any mention in declarations of Mariam Safdar in her tax returns and declarations before Election Commission by her father and/or husband. Why the family opted to use tax havens to buy properties? The answer lies in understanding what tax havens offer. They offer not only low or zero taxes, but also provide facilities for people or entities to get around the rules, laws and regulations of other jurisdictions, using secrecy as their prime tool. Therefore, Tax Justice Network (TJN) prefers the term “secrecy jurisdiction” instead of the more popular “tax haven”.
In order to unveil the mystery of offshore companies, it is necessary to understand the significance of “beneficial owner” and “bearer certificates”. According to BVI offshore law, “a shareholder is a person (individual or corporate), in whose name shares in a particular offshore company are registered”. So, it is basically what the name suggests, the “holder” of shares. However, in some situations, the shareholder may hold shares for the benefit and on behalf of another person (such shareholder would be called “nominee shareholder”). In such instance, the other person, who would accordingly be the real owner of the shares, is the beneficial owner. The ‘beneficial owner’is the person who isthe real, de-facto owner of shares, “entitled to all gains, profits and benefits accruing to such shares“.
The Joint Investigation Team (JIT) formed by Supreme Court failed to mention in its report [on the basis of which references were filed by National Accountability Bureau (NAB) and matter is now before Islamabad High Court (IHC)] that even if someone chooses to configure BVI company with bearer shares, the law requires that all bearer shares are “immobilized”, meaning that the Share Certificates must remain with a Licensed Custodian, together with a written indication as to the actual identity and address of the owner of such shares. Therefore, the person actually loses the main advantage of bearer shares, namely the ability to quickly and anonymously transfer the ownership of the shares.
Most banks in the world would refuse opening account for an offshore company with bearer shares what to speak of giving loans. In the case of Nescoll and Nielson, the offspring of disqualified premier secured a loan of £7 million from Deutsche Bank against four flats in Park Lane[‘Pakistani PM’s children raised £7m against UK flats owned offshore’, The Guardian, April 5, 2016]. This fact alone confirms that the story of transfer of property by Royal Qatar family in 2006 through bearer certificate was fabricated. The case is presently subjudice before IHC and propriety demands not to comment on it any further. However, the legal position must be stated that in view of International Business Companies (Amendment) Act, 2003, which was passed by the British Virgin Islands’ Legislative Council on April 17th, 2003, several changes were made with regard to bearer shares and Directors for International Business Companies (IBCs). After this law was made effective in 2003, the transfer of Mayfair flats through delivery of bearer certificates by royal family of Qatar in 2006 was not possible.
The cases of Aleem Khan and Jahangir Tareen Khan as well as political leaders of all other parties from the perspective of offshore maze were discussed in detail in: All stand fully exposed, Business Recorder, March 3, 2017, ‘Offshore labyrinth’, Business Recorder, October 27, 2017, Disqualification debates, Daily Times, December 24, 2017 and From cases to conviction, Daily Times, July 8, 2018.
The former Chief Justice of Pakistan (CJP) before taking oath, while speaking at Full Court Reference held in honour of outgoing CJP categorically held: “The persons involved in corruption and illegalities need to be dealt with deterrence for this was the most basic and fundamental scourge that did not allow the country to grow and prosper”. It was a test case for the honourable CJP as corruption/corrupt practices, committed even by state functionaries and public officeholders during the period preceding ten years, were not only condoned, but their names were kept secret in utter violation of fundamental right to information (RTI) guaranteed under Article 19A of the Constitution.
Unfortunately, Chief Justice (retired) Gulzar Ahmad took no notice of the matter till his retirement on February 2, 2022. It is hoped that the new Chief Justice of Pakistan, Mr. Justice Umar Ata Bandial, who was part of bench dealing with Suo Muto Case No. 2 of 2018, will now take it up.
The important question is: how could any immunity/amnesty/confidentiality be extended to public officeholders and state servants when they have admitted corrupt practices ten years ago, by availing the scheme? The answer to this vital question remains unanswered as it exposes our State where exists unholy nexus between the law maker, the law keeper, and the law breaker as explained by Nobel Laureate, Swedish sociologist Gunnar Myrdal in his 1968 three-volume work, Asian Drama: An Inquiry into the Poverty of Nations!
It is worth mentioning that the Voluntary Declaration of Domestic Assets Act, 2018 and Foreign Assets (Declaration and Repatriation) Act, 2018 were passed as part of Finance Act, 2018 [received the assent of the President on the 22nd May, 2018] violating Articles 19A, 25 and 79 of the Constitution, especially when the Supreme Court took suo muto action against tax evasion, money laundering and assets stashed abroad in Suo Muto Case 2 of 2018, but no action was taken then and even today.
Section 2(d) of the Voluntary Declaration of Domestic Assets Act, 2018 [the same definition was provided in section 2(h) of Foreign Assets (Declaration and Repatriation) Act, 2018 excluding those who held any office or post ten years ago] says:
- “holder of public office” means a person who is or has been, during the preceding ten years,–
(i) the President of the Islamic Republic of Pakistan or the Governor of a Province;
(ii) the Prime Minister, Chairman Senate, Speaker of the National Assembly, Deputy Chairman Senate, Deputy Speaker National Assembly, Federal Minister, Minister of State, Attorney-General for Pakistan and other Law Officers appointed under the Central Law Officers Ordinance, 1970 (VII of 1970), Adviser or Consultant or Special Assistant to the Prime Minister and holds or has held a post or office with the rank or status of a Federal Minister or Minister of State, Federal Parliamentary Secretary, Member of Parliament, Auditor-General of Pakistan, Political Secretary;
(iii) the Chief Minister, Speaker Provincial Assembly, Deputy Speaker Provincial Assembly, Provincial Minister, Adviser or Consultant or Special Assistant to the Chief Minister and who holds or has held a post or office with the rank or status of a Provincial Minister, Provincial Parliamentary Secretary, Member of the Provincial Assembly, Advocate-General for a Province including Additional Advocate-General and Assistant Advocate-General, Political Secretary;
(iv) the Chief Justice or, as the case may be, a Judge of the Supreme Court, Federal Shariat Court, a High Court or a Judicial Officer whether exercising judicial or other functions or Chairman or member of a Law Commission, Chairman or Member of the Council of Islamic Ideology;
(v) holding an office or post, in the service of Pakistan or any service in connection with the affairs of the Federation or of a Province or of a local council constituted under any Federal or Provincial law relating to the constitution of local councils, co-operative societies or in the management of corporations, banks, financial institutions, firms, concerns, undertakings or any other institution or organization established, controlled or administered by or under the Federal Government or a Provincial Government or a civilian employee of the Armed Forces of Pakistan:
Provided that a member of the Board, not actively engaged in the business and day-today affairs of the said corporations, banks, financial institutions, firms, concerns, undertakings or any other institution or organization shall not be treated as holder of public office under this sub-clause;
(vi) the Chairman or Mayor or Vice Chairman or Deputy Mayor of a zila council, a municipal committee, a municipal corporation or a metropolitan corporation constituted under any Federal or Provincial law relating to local councils;
Explanation.– For the purpose of this sub-clause the expressions “Chairman” and “Vice Chairman” shall include “Mayor” and “Deputy Mayor” as the case may be, and the respective councilors therein; and
(vii) a District Nazim or District NaibNazim, Tehsil Nazim or Tehsil NaibNazim or UnionNazim or Union NaibNazim.
The above position was given protection by the Government of PTI in Explanation to section 5(b) of Assets Declaration Act, 2019 [passed as part of Finance Act, 2019, received the assent of the President on the 30th June, 2019] and additionally confidentiality was also guaranteed under section 14 as all other laws were overruled under section 16 of the said Act.
It is worth recalling that before coming to power, Premier, Imran Khan, and top leadership of Pakistan Tehreek-i-Insaf (PTI) were calling tax amnesties as “immoral”, “undesirable”, “unlawful” and a “slap on the face of honest taxpayers”. After coming into power, the PTI took many U-turns but the worst one was offering asset whitening scheme, drafted and owned proudly by Syed Muhammad Shabbar Zaidi, resulting into tax losses of billions of rupees. The Government of PTI even bypassed the Parliament and notified its asset/income/expenditure whitening scheme—Assets Declaration Ordinance, 2019—througha Presidential Ordinance on May 14, 2019. It was later made part of Money Bill that was unconstitutional in clear violation of the judgement of Supreme Court [(2016) 114 TAX 385 (S.C. Pak.)] which says:
“We may develop this point further; although Article 73(3)(a) of the Constitution states that a Bill shall not be a Money Bill if it provides for the imposition or alteration of a fee or charge for any service rendered, this does not mean that if a particular levy/contribution does not fall within Article 73(2) it must necessarily fall within Article 73(3). Sub-articles (2) and (3) are not mutually exclusive. There may very well be certain levies/contributions that do not fall within the purview of Article 73(3) but still do not qualify the test of Article 73(2) and therefore cannot be introduced by way of a Money Bill, and instead have to follow the regular legislative procedure. The discussion above that the subject contributions/payments do not constitute a tax is sufficient to hold that any amendments to the provisions of the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 could not have been lawfully made through a Money Bill, i.e. the Finance Acts of 2006 and 2008, as the amendments did not fall within the purview of the provisions of Article 73(2) of the Constitution”.
The above judgement of the Supreme Court approved the brilliant discourse and conclusion on Money Bill by the illustrious Justice Mansoor Ali Shah ( then Chief Justice Lahore High Court and later elevated to Supreme Court in 2011 PTD 2643as under:
“The special legislative procedure is, therefore, an exception and must operate in its restricted scope. Being a special procedure it also has to be construed strictly as it is a deviation from the normal legislative process under the Constitution. Integrity of a money bill must be jealously guarded and matters falling outside the purview of Articles 73(2)(a) to (g) of the Constitution should not be permitted to stealthily crawl into a money bill (at times due to political sophistry of the Government in power) -and adulterate its sanctity”.
The PMLN Government in 2018 gave generous incentives to those who were cheating the State by not paying due taxes, indulging in corruption, concealing and/or understating assets/incomes/sales/expenses. Even the looter and plunderers of the national wealth (holding public office or were state functionaries beyond 10 years) were the beneficiaries with people of Pakistan being denied the right to know even their names! Premier Imran Khan at the time of announcing immunities and amnesties by PMLN said “we would rescind them on coming to power”. But later, his government announced yet another amnesty giving unprecedented benefits to the corrupt and tax cheats. Simply shocking!!!
How could ill-gotten money created through corruption have become kosher after 10 years by public officeholders and employees of State? It is worth-mentioning that the National Accountability Ordinance, 1999 was overruled by PMLN under Foreign Assets (Declaration and Repatriation) Act, 2018 and Voluntary Declaration of Domestic Assets Act, 2018 and then by the PTI Government first through Assets Declaration Ordinance, 2019 and then by Assets Declaration Act, 2019 as it was applicable from January 1, 1985. However, nobody took note of it. If the National Accountability Ordinance, 1999 was draconian and reflective of legacy of a dictator, meant for political revenge, why did not Pakistan Peoples Party and PMLN repeal it during the Decade of Democracy [2008-18]? What prevented them to bring a new law and also to include generals and judges—in fact all powerful segments in its ambit liable to be probed by an autonomous agency answerable directly to Parliament.
The Government of Pakistan Muslim League (Nawaz) got Foreign Assets (Declaration and Repatriation) Act, 2018 and Voluntary Declaration of Domestic Assets Act, 2018 passed as part of Finance Act, 2018. All these laws, assuring complete confidentiality to tax evaders and plunderers of national wealth, could not be passed as Money Bill but was blatantly done by the National Assembly in utter violation of the Constitution and judgements of the Supreme Court, namely, 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. Tragically, our civil society also did not bother to challenge these under Article 199 of the Constitution on the basis of above cases and/or invoking Article 189 of the Constitution. Both these schemes fetched 82,889 declarations paying Rs. 124 billion (domestic Rs. 77 billion and foreign Rs. 47 billion), though the then Adviser to Prime Minister on Revenue, Haroon Akhtar, claimed that collection would not be less than US$ 5 billion for foreign assets alone.
As many as 135 persons, named in the Organisation for Economic Co-operation and Development (OECD) database, availed the 2018 tax amnesty scheme of the PMLN 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, getting a relief of Rs. 40.8 billion from the government of PMLN. About 56 people, whose data was shared by the OECD, availed the PTI’s tax 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, not availing amnesty, Muhammad Ashfaq, Director General of Directorate of International Taxes of the FBR, told the Standing Committee of National Assembly on November 7, 2019 that the 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 caught in the OECD web was only Rs. 5.6 billion or 0.64% of the traced assets, indeed a startling revelation before the House Committee. The PTI Government earlier had been proudly taking credit that it received information of around 152,000 bank accounts owned by 57,450 Pakistani nationals, having $7.5 billion in bank deposits. In fact, bulk of this information was received much before the PTI came into power. Premier Imran Khan, before giving amnesty on the insistence of many, especially Shabbar Zaidi, Chairman FBR, time and again expressed determination to bring the looted and untaxed money back. Later, he too conceded before the forces of loot and plunder.
Prime Minister Imran Khan by yielding to demand of announcing asset-whitening scheme, conveniently forgot his extraordinary speech at ‘High-Level Dialogue on Financing for Development‘ at the United Nations in New York on September 26, 2019. There he highlighted the issue of assets stashed in various tax havens by loot and plunder or through tax evasion. He said: “While it is true that illicit financial flows adversely affect wealthy countries, such movement of ill-gotten money is devastating the developing countries across the world”. Imran Khan’s speech was highly appreciated at home and abroad proving his stature as a global leader. He very aptly observed: “I do not think people fully realise the impact it (illicit financial flows) is having in causing poverty, death and destruction in human development in the developing world“—this received a huge round of applause from the audience.
Premier Imran Khan said that “in the last decade Pakistan had a corrupt leadership which took the national debt accumulated over 60 years, up by four times in the last 10 years and most of the money was made out of corruption and sent outside”. In his speech, Imran Khan claimed that after coming into power his government was trying its best to retrieve that money. He lamented that even after locating properties made from illegal money by Pakistanis abroad, “we face a number of legal lacunas and difficulties in trying to bring that money back”.
The briefing of November 7, 2019 to the Standing Committee of National Assembly by Dr. Mohammad Ashfaq and Shabbar Zaidi clearly established that Premier Imran Khan acted diametrically opposite to what he pleaded in respect of bringing looted and untaxed money stashed abroad. This was the worst one could expect from the PIT Government!
It seems that Premier, Imran Khan, has yet not realised how his advisors let him down by foregoing 70% tax on untaxed assets for which definite information was already available through multilateral treaty signed by Pakistan. How could amnesty [that too at ridiculous rates] be given when the department was in possession of actionable information? In only 56 cases where data was shared by the OECD, due to PTI’s tax amnesty, national exchequer suffered loss of Rs. 20.6 billion. The nation will never forgive many, especially Premier Imran Khan speaking ostensibly from higher moral pedestal, for this lapse which also belies all their claims of bringing tax evaders and looters of national wealth to task. Actions speak louder than words!
It needs to be highlighted that in the Finance Act, 2019, the following provision was inserted in the Income Tax Ordinance, 2001:
“192B. Prosecution for concealment of an offshore asset.– (1) Any person who fails to declare an offshore asset to the Commissioner or furnishes inaccurate particulars of an offshore asset and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or more shall commit an offence punishable on conviction with imprisonment up to three years or with a fine up to five hundred thousand Rupees or both”.
Strangely, in the presence of above clear provision inserted by the PTI Government itself in the law, it is not ready now to expose/penalise those who concealed offshore assets having revenue impact of concealment or furnishing of inaccurate particulars of Rs. 10 million or more. One such example recently surfaced, as according to Reuters Press agency [Pakistani tycoon agrees to hand over £190 million to settle UK probe], “one of Pakistan’s richest and most powerful businessmen and biggest private employer, ….known for upmarket gated housing communities…has been caught up in corruption investigations…..agreed a settlement…..hand over a property, 1 Hyde Park Place, valued at 50 million pounds, and cash frozen in British bank accounts…140 million pounds….on the grounds that the money….acquired illegally…”
While the signatory of the deal with NCA said: “some habituals……are twisting the report of NCA [National Crime Agency] 180 degrees to throw mud at me. I sold our legal and declared property in UK to pay 190M £ to Supreme Court Pakistan against Bahria Town Karachi”, the Special Assistant to the Prime Minister on Accountability, Mirza Shahzad Akbar, at a Press conference on December 5, 2019 said: “We [the government of Pakistan, NCA and Malik Riaz] have also signed a deed of confidentiality. Therefore, I cannot comment more than what has already been presented in the official press releases of the government and the NCA”.
The stance taken by the Special Assistant to the Prime Minister on Accountability, now resigned,regarding the deed of confidentiality in a public matter is in utter violation of the right of the citizens under the Right of Access to Information Act, 2017 read with Article 19A of the Constitution, and the order of the Supreme Court of Pakistan in Watan Party & Others v Federation of Pakistan & Other PLD 2012 Supreme Court 292, which says:
“Article 19A has thus, enabled every citizen to become independent of power centres which, heretofore, have been in the control of information on matters of public importance….. Article 19A is a grant of the Constitution and, therefore, cannot be altered or abridged by a law enacted by Parliament…It, therefore, will not for this Court to deny to the citizens their guaranteed fundamental right under Article 19A by limiting or trivializing the scope of such right through an elitist construction whereby information remains the preserve of those who exercise state power.”
The passing of Foreign Assets (Declaration and Repatriation) Act, 2018, Voluntary Declaration of Domestic Assets Act, 2018, promulgation of Assets Declaration Ordinance, 2019 and later enacted as Assets Declaration Ordinance, 2019 as part of Finance Act, 2019 were patently unconstitutional as elaborated above. Now what makes the situation more painful is the fact that the PTI, once valiantly opposed such laws and championed the right to access to information, is emerging as the zealous protector of tax evaders and looters of the national wealth by not only extending them amnesties/immunities but also lending full support and patronage, saving them from public exposure and punishment as per laws of the land!
This confirms that the beneficiaries of stolen and untaxed wealth have been and yet remain untouchable in Pakistan, and now further protection is assured to them in the name of inducing and promoting investment. The unlawful actions of the National Accountability Bureau (NAB), exceeding the given authority or to allay fear of businessmen from its alleged “draconian actions” should have been dealt with under the law awarding the responsible personnel punishment and heavy fines to be paid from personal pockets.
The National Accountability Ordinance, 1999, made effective from 1st day of January 1985, since its inception, covered “a holder of a public office, or any other person” if involved in “corruption” and “corrupt practices” as defined in section 9 of the said law. The definition of “person” as provided in section 5(o) in National Accountability Ordinance, 1999 says: “unless the context otherwise so requires, includes in the case of a company or a body corporate, the sponsors, Chairman, Chief Executive, Managing Director, elected Directors, by whatever name called, and guarantors of the company or body corporate or any one exercising direction or control of the affairs of such company or a body corporate and in the case of any firm, partnership or sole proprietorship, the partners, proprietor or any person having any interest in the said firm, partnership or proprietorship concern or direction or control thereof”.
The Supreme Court of Pakistan upheld both the retrospective application of National Accountability Ordinance, 1999 [Khan Asfandyar Wali and Others v Federation of Pakistan and Others PLD 2001 Supreme Court 607] and also its applicability to persons other than “holders of public office” [Abdul Aziz Memon & other v The State & Others PLD 2013 Supreme Court 594], defined in section 5(m) of the said law. The Presidential Ordinance, National Accountability Bureau (NAB) Ordinance 2019 amending the law to allegedly protect the corrupt politicians, dishonest and crony civil servants, tax evaders and looters of national wealth is reportedly challenged in Supreme Court. Since the matter is sub-judice, it is not appropriate to comment on it any further.
It is well-established that the role of National Accountability Bureau (NAB) in curbing perpetual and growing corruption since its inception has been highly disappointing. Even after submission and re-submission of reports of “mega corruption cases” before the Supreme Court, NAB has failed to prosecute a single big fish. But the important question is how Federal Board of Revenue (FBR) will proceed against those taken out of jurisdiction of NAB as majority has already availed Foreign Assets (Declaration and Repatriation) Act, 2018, Voluntary Declaration of Domestic Assets Act, 2018, Assets Declaration Ordinance, 2019 and Assets Declaration Act, 2019 as well as secured complete confidentiality? What mechanism and tools does it possess that can confirm that assets whitened were not created out of proceeds of crime? Against the men in power and parliamentarians, who could not even avail the above amnesties as clearly debarred, FBR in the past miserably failed to show any inclination to proceed against them. It is evident from Tax Directories of Parliamentarians, published by FBR from 2013-19 that vast majority of them declared meagre incomes that never matched their standard of living but no question is/was ever posed, let alone taking any action as is/was done in the case of many ordinary citizens.
In a Press report, ‘Parliamentarians, Imran, tax expert raises questions about outcome of audit’ [Business Recorder, October 27, 2018] a vital question was raised: what was the outcome of cases of parliamentarians selected for audit through random balloting last year. What was the result of the audit of parliamentarians including Prime Minister Imran Khan whose case was selected for audit in the past?” It may be recalled that many parliamentarians were selected for audit for Tax Year 2015-16 through computer ballot using parametric selection mechanism but FBR failed to take appropriate action or at least never divulged the details of how much extra tax was collected. FBR is totally politicised and muzzled by men with money power and having track record of inefficiency and corruption as well as accommodating the government of the day and victimizing its political adversaries and is totally incapable of doing accountability the Prime Minister has been claiming would be done.
It is fully justifiable to take powers of tax probe from NAB, unless public officeholders are involved, but it is equally important to give full autonomy to FBR and other agencies from all outside influences, especially political subservience, to counter tax evasion, corruption and abuse of any state office for personal gains. In the past, we have witnessed a complete failure on this front. Let us recall what the Supreme Court desired and directed while exercising powers under Article 184(3) of the Constitution in its order of February 1, 2018 in Suo Muto Case No. 2 of 2018:
- The State Bank of Pakistan shall before the next date of hearing submit a comprehensive report regarding steps which have been taken under the international agreements/treaties/protocols to identify the citizens who hold accounts in foreign jurisdictions, including UAE, Switzerland, Luxemburg, Spain, UK, etc. and other tax haven jurisdictions, including, British Virgin Islands, Cayman Islands, Channel Islands, etc.
- The State Bank of Pakistan, the FBR, the Security & Exchange Commission of Pakistan and the Ministry of Finance shall submit report about the steps taken, in collaboration with other State institutions, for retrieval of the said money.
- The Federal Board of Revenue shall also submit a report providing details of the steps taken on the basis of information available, inter alia, through Panama Papers and Paradise Papers and the action taken against citizens holding properties and banks accounts in foreign countries.
- All State agencies including IB, ISI, MI and FIA arc directed to share all requisite information available with them with this Court.
- The State Bank of Pakistan, FBR, the Ministry of Finance and Ministry of Foreign Affairs shall collaborate with each other, collect and share information and approach the afore-noted foreign jurisdictions to obtain such/other further information, as may be necessary, through legal and diplomatic channels”.
What happened thereafter is history. The instructions of Supreme Court resulted into amnesties and immunities for the rich and mighty and the sufferers were the ordinary citizens of Pakistan. No action was taken for utter violation of Articles 19A and 79 of the Constitution and many other provisions that do not allow legislators to violate fundamental rights of the citizens and favour tax evaders and looters of the national wealth.
In the wake of Panama Papers: Politicians, Criminal & Rogue Industry That Hide Their Cash, publishedby International Consortium of Investigative Journalists (ICIJ), on April 3, 2016, heated debatesstarted in every country for disclosures of information relating to matters falling in the category of public importance. In Pakistan people soon became disillusioned because nothing worthwhile happened [In other countries billions were recovered using the information]. On the contrary, the information of tax evaders and looters of national wealth was excluded from public access first by the Government of PMNL and then of PTI ignoring Article 19A of the Constitution.
The following articles were published in this newspaper but nobody bothered to consider and take remedial action for countering corruption, tax evasion and unlawful stashing of assets abroad:
- Equal or privileged? , The News, February 12, 2022.
- Countering loot and plunder, Business Recorder, December 29, 2017
- Paradise Papers: another wake-up call, Business Recorder, November 10 & 12, 2017
- Offshore labyrinth, Business Recorder, October 27, 2017
- Trail of hidden wealth, Business Recorder, May 6, 2016
- Taxing undisclosed income and assets, Business Recorder, March 27, 2015
- Probing Swiss accounts, Business Recorder, August 15, 2014
Unfortunately, nobody has taken note of above. FBR, SBP, FIA, NAB and other agencies never cared to investigate matters repeatedly pointed out in the above columns. The Supreme Court even in Suo Muto Case 2 of 2018 did not take cognizance of these otherwise a breakthrough could have been achieved if FBR was ordered, as suggested, to produce the entire record related to 2014 negotiations for new Tax Treaty with Switzerland. It could have unveiled the dirty tricks played by the government of PMLN to protect tax evaders and looters of national wealth.
The then Finance Minister, Muhammad Ishaq Dar, now a fugitive, on March 7, 2017 while informing the National Assembly that “Pakistan will sign an agreement with Switzerland on exchange of information regarding bank accounts on March 21”, did not tell the House what happened in August 2014 when the then Chairman FBR was prevented from leading a delegation to Switzerland to re-negotiate the treaty. Treaty renegotiated and inked after talks by Chief Taxes on August 24-26, 2014 was later blocked [details available in Pakistani cash in Swiss banks pulled out, The Express Tribune, February 22, 2017].
It is undeniable that although our governments were aware of the fact that majority of the offshore companies of Pakistanis were registered in British Virgin Islands (BVI), yet they did not take any initiative to sign a Tax Information Exchange Agreement (TIEA) with BVI similar to the one signed by India way back in 2011. Till today, no effort has been made even for initiating any such move—see Foreign Illicit Assets Act (FIAA) of 18 December 2015 for known case of $60 million stashed by Asif Ali Zardari in Switzerland about which even order of the Supreme Court in Dr. Mobashir Hassan and other v FOP and others PLD 2010 SC 265 was never implemented.
On October 1, 2010, the Swiss Parliament passed a law, The Restitution of Illicit Assets Act, 2010 (RIAA), empowering the Swiss Federal Tax Administration (FTA) to sign DTAs based on revised Article 26 of the OECD Model Tax Convention to cooperate with international requests for exchange of bank information of all kinds. In the wake of this development, many countries approached Switzerland to upgrade their DTAs to incorporate OECD’s Article 26. The United States, Germany, France, United Kingdom, the Netherlands, Qatar, and India after incorporating revised Article 26 of OECD started reaping notable tax revenue gains and receiving capital back from Switzerland. Our men in power tried to hoodwink the masses by saying that they were going for Organization for Economic Cooperation and Development (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters. They were just buying time to ensure that no information comes to Pakistan during the period of their rule! The PTI finally made effective new treaty with Switzerland but they refused to give last years’ data and prospective information for calendar year 2020, was to come from September 2021[Switzerland refuses to share five-year-old information with Pakistan, The Express Tribune, December 17, 2019]!
Later, the Swiss Parliament approved the automatic exchange of bank data with 18 additional countries from 2021 including Pakistan. Switzerland started providing details of bank accounts held by their citizens for January–December 2020 period only. The earlier period data is now partially exposed in Suisse Secrets.
The revised tax treaty between Switzerland and Pakistan became effective from January 1, 2019. The new tax treaty was signed in March 2017 but it took nearly two years before it was enforced. It replaced the 2008 tax treaty between the two countries. By not honouring the 2014 renegotiated treaty the government of PMLN facilitated many to transfer shady funds from Swiss banks. The treaty signed on March 21, 2017 was delayed for two years to take effect so that it would not yield the desired results. It confirms that the delay was intentional, willful and well-planned—though crafty politicians of PMLN kept on taking credit of taking actions in “national interest” merely to deceive the people! Instead of ordering inquiry in the matter, PTI is guilty of protecting the culprits!
Successive governments in Pakistan, unfortunately, have been adopting a policy of appeasement towards tax cheats and looters of national wealth. Even private efforts to invoke extraordinary jurisdiction of Supreme Court and High Courts to retrieve looted wealth and untaxed money have not been fruitful. On the contrary, the Indian Supreme Court took historic decision in the case of Ram Jethmalani and Other v Union of India [(2011) 8 SCC 1=2011 PTR 1933 (S.C. Ind)] and ordered ‘Special Investigation Team’ (SIT) to supervise the government-led investigations into black money belonging to Indians, lying abroad. One hoped that our Supreme Court would consider the case of Ram Jethmalani in Suo Motu Case No. 2 of 2018 wherein Constitution Petition No.72 of 2011 was also attached, but it never did so though the petitioner, ex-senator and former minister, Muhammad Ali Durrani, specifically raised it as well as invoked many other valid points in writing in a Miscellaneous Application.
Judicious and meaningful exercise of fundamental right guaranteed under Article 19A can make all the four pillars of the State—Legislation, Judiciary, Executive and Media—accountable to the public at large. Right to information under the Right of Information legislation of federal and provincial governments in all matters of public importance, access to official record of FBR and other government departments (which is not secret) and free availability of what is owned by privileged classes must be assured. It will certainly help improve governance, democratic dispensation, transparency and ensure rule of law.
The exercise of constitutional right of access to information in all matters of public importance is necessary for transparency, accountability and good governance—essential elements of democratic dispensation. At the heart of Article 19A is ensuring accountability of all. Logically, the right to information must start from those who judge, adjudge and legislate. It is high time that all the laws relating to secrecy of assets/income/expenditures of mighty segments of society are withdrawn and their affairs be made public. It will be the first right step towards creditable process of accountability in Pakistan.
It is time that Supreme Court of Pakistan starts hearing Suo Muto Case 2 of 2018 and orders public disclosure of tax/asset/expenditure declarations of judges, high-level civil military officials and businessmen who have been beneficiaries of write-off of huge loans from banks, for transparency and as fulfillment of inalienable right guaranteed by the Constitution to citizens under Article 19A. As held by the Supreme Court, this right cannot be altered or abridged by a law enacted even by Parliament—Watan Party & Others v Federation of Pakistan & Other PLD 2012 Supreme Court 292. The Apex Court even went a step further to hold that the citizens could not be denied their guaranteed fundamental right under Article 19A by limiting or downplaying its scope through a elitist and/or narrowed construction through which information remains confidential with those in power.
In the light of dictum laid down in Watan Party & Others v Federation of Pakistan & Other PLD 2012 Supreme Court 292, binding under Article 189 of the Constitution, no person should hide behind the laws relating to “confidentiality” and “secrecy” [Equal or privileged?, The News, February 12, 2022]. There should be joint and non-partisan Standing Committee of National Assembly & Senate on Countering Corruption & Tax Evasion etc having access to record of FBR and all other departments. The record of FBR, EEC, SBP, NAB, Anti-Narcotics Force (ANF) and FIA that is of public importance should be made available under the Right of Access to Information Act, 2017 without and restrictions and creating the myth of “security”. Presently, there exists confusion and misconception in certain circles that Income Tax Ordinance, 2001 guarantees “complete confidentiality” for tax declarations as well as documents filed, and that tax officials cannot divulge the same in any circumstances. The correct position of law is different—there are many exceptions to this rule. In fact, FBR in the past has been publishing tax declarations of all taxpayers with the approval of the federal government.
Section 216 of the Income Tax Ordinance, 2001 [“the Ordinance”], as amended by Finance (Supplementary) Act 2022 giving exclusion to men in khaki is ultra vires of the Constitution as highlighted in Equal or privileged?, The News, February 12, 2022. Section 216(1) says that all particulars contained in any statement made, return furnished, or accounts or documents produced or any evidence given, or affidavit or deposition made, in the course of any proceedings under this law or any record of any assessment proceedings or any proceedings related to recovery of a demand shall be confidential and no public servant save as provided in this Ordinance may disclose any such particulars.
There are many exceptions to this rule as contained in sub-sections (3), (4), (5), (6A), (6B) and (6C) of section 216. For example, it is clearly provided in sub-section (5) that nothing contained in sub-section (1) of section 216 shall prevent the Board from publishing, with the prior approval of the Federal Government, any particulars filed by any taxpayer and sub-section (6) in categorical terms states: “Nothing contained in sub-section (1) shall prevent the Federal Government from publishing particulars and the amount of tax paid by a holder of a public office as defined in the National Accountability Bureau Ordinance, 1999 (XVIII of 1999).” Sub-section (6C) says: “Nothing contained in sub-section (1) shall prevent the Board from publishing the names of offshore tax enablers, in the print and electronic media who have enabled offshore tax evasion”.
FBR till today has not divulged the names of “offshore tax enablers, in the print and electronic media, who have enabled offshore tax evasion”, rather it isdenying the right to information in respect of recent deal/settlement signed between NCA of UK and a Pakistani accused of offshore tax evasion of £190 million. Under section 216(6C) of the Income Tax Ordinance, 2001 and in terms of Article 19A, it is proactive duty of FBR to publish complete information of this settlement which the Government of PTI wants to keep secret for reasons best known to it!!
It is understandable why we have failed to counter corruption and tax evasion. It may be remembered that about 70% of Pakistani legislators—members of Senate and National Assembly—were exposed for not complying with section 116(2) of the Income Tax Ordinance, 2001 by not filing tax returns, wealth statement and personal expenses having taxable income of Rs. 500,000 in tax year 2011. Instead of being ashamed of their misconduct and violating the law of the land, they accused FBR for “illegally” disclosing data. FBR was also proven guilty for not taking any action against these defaulters and many of its own and other government officials for not complying with tax laws. Even after furious campaign by us and others forcing legislators to file returns and wealth statements, tax directories published since 2013 show farcical quantum of incomes declared by majority of legislators vis-à-vis their assets and standard of living! But FBR continues to behave like a silent spectator and a totally ineffectual body. Till today, it has failed to get returns from all legislators, political parties, doctors, lawyers, schools, business houses, deeni madrassahas (religious schools) and NGOs—just to mention a few!
It is, however, worth pointing out that violation of tax laws is not confined to parliamentarians. The elites—militro-civil bureaucracy, landed aristocracy, politicians, religious and spiritual leaders (ulema and pirs), loan beneficiaries, unscrupulous business tycoons—flout laws of the land with impunity and take pride in it. Since assets and tax declarations of powerful militro-civil-judicial hierarchy are not available, the citizens cannot know how much state land was given to them on throw-away prices and whether they paid tax on differential of market value as envisaged in section 13(11) of the Income Tax Ordinance, 2001 for this and other similar favours at taxpayers’ expense. This is the stark reality of Pakistan—legislators make a mockery of laws enacted by themselves, and the mighty militro-civil-judicial complex takes cover under special laws to avoid public disclosure of assets and tax declarations—availing offshore facility for them is itself a big proof!
There is a formidable resistance from all politicians for establishment of an independent accountability authority in Pakistan as they know that such a body would expose their corruption and end their control over the State. The way forward is that political parties should be forced to keep proper accounts, get them audited by reputed firms and file tax returns on a regular basis. Once this is made mandatory under the law, they would have no option but to take into their folds only those people who honestly discharge their tax obligations. The process of filtration within the parties is a necessary step towards a true democratic culture. Election Commission should concentrate on this aspect of the matter to fulfill its constitutional liability under Article 218(3) and political parties must ensure in-house accountability and through an independent accountability agency that is under direct control of judiciary and not executive. Its members and chairman should be appointed through public hearing in a joint House Committee for Accountability for which, proper legislation should be initiated without any further loss of time.
Like Pandora PapersandPanama Papers, Suisse Secrets have proved beyond doubt that the corrupt international infrastructure allowing élites to escape tax and regulations is also widely used by criminals and terrorists. As a result, tax havens are heightening inequality and poverty, corroding democracy, distorting markets, undermining financial and other regulation and curbing economic growth, accelerating capital flight from poor countries, and promoting corruption and crime around the world, stripping off humanity from mankind.
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Ms. Huzaima Bukhari, MA, LLB, Advocate High Court, Visiting Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), is author of numerous books and articles on Pakistani tax laws. She is editor of Taxation and partner of Huzaima & Ikram and Huzaima Ikram & Ijaz, leading law firms of Pakistan. From 1984 to 2003, she was associated with Civil Services of Pakistan. Since 1989, she has been teaching tax laws at various institutions including government-run training institutes in Lahore. She specialises in the areas of international tax laws, ML/CFT related laws, corporate and commercial laws. She is review editor for many publications of Amsterdam-based International Bureau of Fiscal Documentation (IBFD) and contributes regularly to their journals.
She has coauthored with Dr. Ikramul Haq many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes, Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
The recent publication, coauthored with Abdul Rauf Shakoori and Dr. Ikramul Haq, is Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46 and https://aacp.com.pk/
She regularly writes columns/articles/papers for Pakistani newspapers and international journals. She has contributed over 1700 articles and research papers on issues of public finance, taxation, economy and on various social issues in various journals, magazines and newspapers at home and abroad.
Twitter: @Huzaimabukhari
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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He isVisiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
The recent publication, coauthored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46 and http://accp.com.pk/
He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequelPakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax.
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Twitter: DrIkramulHaq
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The joint and individual books and articles of the writers can be seen at:
http://petiwalabooks.com/huzaima-dr-ikram-ul-haq?orderby=6