DR. IKRAMUL HAQ
Dr.Ikramul Haq, a leading international tax counsel, is a well-known author specialising in international tax, press, intellectual property, corporate and constitutional law. Dr. Ikram is Chief Partner of Lahore Law Associates (fax: +92 42 7226953, e-mail: firstname.lastname@example.org). He is also a member of the visiting faculty of the Institute of Direct Taxes in Lahore. He served for 12 years as Deputy Commissioner of Income Tax. He studied law, literature and journalism for his Masters and Doctorate degrees. He has written many books on various aspects of Pakistani law, some of which are co-authored with his wife, Ms Huzaima Bukhari, Additional Commissioner of Income Tax. He has been awarded Doctorate of Law for his research: Tax Reform in Quasi-Constitutional Perspective.
Every civilised society respects and adheres to the cardinal principle that one should not be forced to pay a tax imposed by a government without having the opportunity to vote for or against the tax measure, either directly, or through elected representatives. The present setup (which is a military rule minus martial law) since deposing the elected government on 12 October 2000 has imposed a number of tax measures in utter violation of this well-established rule of law.
Tax system is one of the fundamental elements of a constitutional democracy. The important questions such as who is to be taxed, how much and for what purposes, are essentially political questions. These kinds of questions are always resolved through a political process. How tax obligations are to be imposed, administered and enforced are constitutional questions. The imposition, administration and enforcement of taxes raises problems about the rule of law, proper division of powers, the role of judiciary and so on.
The imposition and administration of taxes is a purely constitutional issue, which cannot and should not, be tackled by a military regime against whose policies the people have no right to vote. The history of taxation reveals that undemocratic rulers have lost control of power because of oppressive tax measures. Coffield puts it very aptly when he asks us to consider the “staggering thought that, had it not been for the insistence of George III and Lord North on retaining the 3d. a pound duty on all tea entering America, the American people today might be loyal subjects of the British Crown.”
Political process for the establishment and reinforcement of a constitutional democracy and democratization of society has always been interrupted in Pakistan by military regimes, for which the blame goes mainly to the political leadership itself, which is both immature and corrupt.
The present military setup on assumption of power immediately waged a war against tax evaders and wealth plunderers for which it earned applause from every body except the vested interests. However, the civil bureaucracy through tax administration managed to convert this war against the common people by hoodwinking the military authorities convincing them that small traders are the real culprits! The war against the tax evaders was diluted and focus was shifted to a National Survey for the so-called documentation of the economy. In the meantime the civil bureaucracy managed to provide unprecedented help to their friends through tax amnesty schemes. The black money and assets worth 100 billion were whitened and the poor State got only Rs 10 billion. This is where the much-publicised process of accountability ended. Pay us and go home is the modus operandi of this regime and our very honest Chief of NAB has been reduced to the level of a collector called the lumbardar in villages.
Had it been a revolutionary, pro-people military takeover, we would have seen confiscation of property of tax evaders and the plunderers of the national wealth. By this time the State Exchequer would have been credited with Rs.500 to 800 billions of extra money. Besides, a right example could have been set to give a clear message that such elements have no place in the Pakistani society. Alas we have again lost a golden opportunity. The present military regime has also proved to be yet another advocate of status quo and not a revolutionary force capable of changing the fate of the poor and the downtrodden people of Pakistan.
The sufferings of Pakistani masses are increasing day by day as the present regime is vigorously following the agenda of tax reform prescribed by the foreign masters who have their own vested interest to see this nuclear-state as a bankrupt economy. Their designs have now a better chance to succeed, as no representation is possible against the taxation measures of the present military regime.
The implementation of Rule of Law determines the failure or success of a society, no matter whether it has democratic or undemocratic form of government. In the tax context, it means that taxes shall be imposed through a proper consultation method, preferably through parliamentary process, rather than through administrative discretion. The regime has been forcing the President to keep on issuing badly drafted ordinances (Finance Ordinance 2000 is the worst example of such an exercise of administrative discretion) which have been prepared by incompetent people in the CBR without any contribution of the Cabinet let alone to elicit public opinion or expert professional advice.
The excessive use of administrative discretion and delegation of legislative authority to tax bureaucracy has destroyed the entire tax system of the country. The so-called wizards sitting in the CBR have been playing havoc with the tax laws by issuing infamous SROs and administrative instructions. The process was a modus operandi to serve the political masters during the so-called democratic governments. It continues unabated during the present setup, now in order to serve the interest of foreign masters to impose all kinds of oppressive, anti-people tax laws and recovery measures.
Tax administrative authorities should be given powers to deal with tax evasion and avoidance, but this kind of broad administrative discretion to alter the law passed by the parliament or promulgated by the President is simply unacceptable as it goes on to negate the principle of the Rule of Law. Tax system and tax laws should be framed and enacted through a democratic process and once they are passed should be properly implemented by the tax administration. All the segments of society should adhere to the rule that nobody is above the law. In Pakistan these laws are meant only for the helpless, whereas the mighty and the privileged classes resort to open defiance of law to show that they are the rulers.
No tax should be imposed unless the government has actually exercised the legal power to impose it. In some countries such as France and Belgium, this “right” to choose untaxed alternatives is understood in constitutional rules enjoining the strict interpretation of law. The so-called champions of democracy while strongly asking for the restoration of electoral process in Pakistan are not opposing the present regime’s tax policies, knowing that in fact their agenda is being implemented without any questioning or resistance through the people’s right to vote against it.
There exists a serious danger in today’s Pakistan that the very legitimacy of the taxation system may be destroyed, if not ultimately the legitimacy of the government. Oppressive tax measures are not a basis for good governance. The fragile trust between citizens and the rulers, professionals and their clients, employers and employees is easily destroyed, as is the tenuous social solidarity between groups at different levels of society.
The present regime must understand that Rule of Law in the context of tax requires that taxation must include not just the safety of the individual against unlawful actions of fiscal authorities, but also assurance of the loyal taxpayer that he is not abused and taken for a ride, whereas smarter people get away with tax avoidance/amnesty schemes.
The present regime has no authority to impose taxes, as no representation against it exists. The policies it pursued so far in fiscal areas are those presented and prepared by the IMF people. The tax administration has already trapped the present regime in technicalities. The people-friendly image of the present regime that emerged after 12 October has already vanished, courtesy the ill-advised tax measures.
No government can survive long unless it works under strict norms and moral values. We will never achieve stability if our political, legal and fiscal institutions remain threatened by military intervention or even interference. These basic institutions and the associated value structures should be properly safeguarded, as these are in fact public capital and the social infrastructure of liberal democratic society. If the present regime wants to protect the vital interests of Pakistan, it must pave the way for design and reform of democratic institutions, standards, norms and moral values without which instability will deepen. There is a genuine apprehension that any further disintegration of our political, legal and fiscal institutions may culminate into a complete disaster.
 J Coffield, Popular History of Taxation (London, Longman, 1970) at page 82
 A Freiberg Ripple From the Bottom of the Harbour: Some Social Ramifications of Taxation Fraud (1988) 12 Criminal Law Journal 136, at 158.