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State gifts, tax evasion & rule of law

Huzaima Bukhari, Dr. Ikramul Haq & Abdul Rauf Shakoori

Qui sentit commodum, sentire debet et onus

This famous legal maxim states that those who receive an advantage must also bear the burden. Former Premier Imran Khan who succumbed to the vote of no-confidence tabled by the opposition is now under criticism for taking undue advantage of his position and retaining state gifts at throwaway prices. Based on the information that surfaced to date, it seems that Imran Khan and first lady acted imprudently by retaining each gift that was presented to them while they were representing the State of Pakistan.

It is a courteous norm that foreign governments and their heads offer gifts—tokens of gratitude—to their counterparts,—it is indeed reprehensible to say that Imran Khan sold these gifts in the open market to reap hefty profits. This might have earned him some extra bucks, however, as a nation, it earned embarrassment for everyone.

The matter at hand is of legal and technical nature. But the most unfortunate part is the lack of decorum in the office held by the former premier, who loves to preach ethics and moral values. He acted quite contrarily while in office. The Toshakhana episode portrays a negative image of an executive head of state defying democratic and diplomatic norms for personal gains.

Sections of the media alleged that while in office tax returns of Imran Khan did not contain information about gifts received till the fiscal year 2020-21. Allegedly, the former premier and first lady did not disclose these precious items in tax returns for more than three years until the media exposed the same. There are accusations of lower value for the acquisition of a few gifts e.g., as low as Rs. 3,500 only. As Prime Minister of Pakistan, Imran Khan and his wife retained seven Rolex watches, multiple necklaces, bracelets, rings, multiple diamond chains, gold pens, and even dinner sets by paying small amounts of money.

As per section 12 read with section 13(11) of the Income Tax Ordinance 2001, the proceeds of the gifts were taxable as benefits derived while holding office. The non-declaration of the same also attracts Article 62(1)(f) of the Constitution of the Islamic Republic of Pakistan [“the Constitution”] as was done to disqualify Nawaz Sharif.

The golden principle of law “fiat justitia ruat caelum” i.e., let justice be done though the heavens fall, requires the courts to follow law in true letter and spirit without any fear or favour. Previously in Muhammad Hanif Abbasi v Imran Khan Niazi [PLD 2018 SC 189], it was established that Imran Khan held assets through an offshore company namely, Niazi Services Limited (NSL) which was formed in 1983. Even though Mr. Khan purchased the London flat in 1983, two years after he became an income tax filer in Pakistan in 1981, he neither disclosed NSL nor the London flat in his income tax/wealth tax returns.

As per applicable laws, even if foreign earnings as non-resident were the source of funding for the London flat, it was an asset that he was bound to disclose in his wealth tax return under the erstwhile Wealth Tax Act, 1963 after he became a filer in 1981. There was continuous default to pay due taxes until he availed the Tax Amnesty Scheme of 2000—though he earlier stated that such amnesties were a tool of facilitation for tax evaders at the cost of law-abiding citizens. However, he was a prime beneficiary of the tax amnesty scheme offered by General Pervez Musharraf in 2000.

Despite availing tax amnesty and continuously taking different stances for explaining sources of investment, Imran Khan received a clean chit from the apex court [PLD 2018 SC 189] and one of us made a detailed analysis in Khan passes the test, Daily Times, December 31, 2017. It was argued that amnesty was for tax purposes alone and could not be extended to defeat the constitutional command contained in Article 62(1)(f) that was applied in the case of three-time elected Prime Minister, Mian Muhammad Nawaz Sharif.

Though Imran Khan is very fond of western democracies, he must be cognizant of the fact that where a person is untruthful in discharging the noble task of lawmaking and administering the affairs of a State in a government office, he has no place in politics. In PLD 2018 SC 189, he was declared Sadiq and Ameen even after admitting tax evasion for almost two decades.

Imran Khan has to clarify his position in another matter that relates to fundraising for flood victims with the promise to build houses. However, despite a lapse of more than a decade, no house was built, nor any explanation was provided regarding utilization of that money. Now once again, Imran Khan declared as “Mr. Clean”, is accused of misstatements in his tax returns while holding the most powerful office of Prime Minister. After his ouster, he knows the consequences of such lapses. Thus, he is taking advantage of his political position and trying to create chaos in the country for personal political gains to get away with all violations and lapses he committed while in office. During his last days in office, his act of violating the constitution and trying to use his authority, later building a fake narrative against the judiciary for upholding the constitution and then defaming military for their neutral role and playing with the national security of the country was nothing but to keep himself in power without realizing the damage being done to the polity, constitution, and nation.

Be as it may, it is the responsibility of the concerned agencies to investigate these matters without compromising his basic right envisaged under Article 10A of the Constitution and settle these issues once and for all without offering any special treatment that he enjoyed in the past. The public has the right to know the truth about all financial and tax affairs of men in khaki or mufti and if anyone is found abusing his/her authority for personal gains, he/she must be taken to task without any fear or favour if democracy and rule of law is to flourish in Pakistan.


Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’. They have recently coauthored a book, Pakistan Tackling FATF: Challenges and Solutions      

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