Daily Times

In the wake of Supreme Court’s suo motu action on February 1, 2018 regarding the unlawful outward remittance of funds, stashing of assets abroad and flight of capital causing serious imbalance within Pakistan, the rich and mighty have appeared on various TV talk shows, warning that this action is another exercise in futility. They claim that laws do not permit probes into such investments and that leaked information by some media persons has no value unless authenticated by the governments in whose countries the assets in question were created and funds parked. Their main reliance to defeat the exercise undertaken by the apex court is on the Protection of Economic Reforms Act, 1992 (PERA) and limitations provided in the Income Tax Ordinance, 2001 for going beyond five years in the case of filers and 10 years in the case of non-filers.

Pakistan’s elites not only evade taxes with impunity but also occupy important positions. They will make every effort on the compliance of the set date (February 15, 2018) to convey to the Supreme Court that their hands are tied due to PERA, Foreign Accounts [Protection] Ordinance, 2001 and lack of bilateral agreements with tax havens.

The question that has everyone baffled is: Why does Parliament approve and pass such undesirable laws? Why are they not repealed? For the last many decades, Pakistan has been a victim of terrorism, tax evasion, corruption, reverse capital flows and capital flight, all due to policies of appeasement by successive governments and laws that protect the perpetrators of these crimes. A story in a The News titled Policymakers also benefit from foreign remittances testifies to this. According to the story, a public office holder [Special Assistant to Prime Minister on Revenue], was seeking refuge under PERA for remittance of Rs. 700 million for not disclosing its source. If his own tax affairs are questionable, will he ever ask the Federal Board of Revenue (FBR) to take tax evaders to task? The answer is obvious. Now that a breakthrough has been made by the media showing that investment in Dubai alone by Pakistanis during the past ten years is in billions, he is referring to PERA, laws of limitation and what not to show inability to initiate action against the tax evaders who created assets abroad through illegal transfer of funds.

The Prime Minister and his two advisers on finance and revenue affairs are talking about a new tax amnesty scheme. Why did they not propose laws to the parliament in the wake of the Panama, Bahamas and Paradise leaks to end amnesties and immunities? Even within the existing law, cases can be reopened beyond limitation provided using special provision of section 214A of the Income Tax Ordinance, 2001. But obviously, the government will not allow the FBR to use it as they are not serious about taking action against the persons who evaded taxes and stashed funds and assets abroad.

Due to abhorrent laws protecting dirty money, Pakistan has lost billions required for investment and betterment of society. Now the only hope is the Supreme Court, which can declare such laws to be in violation of the Constitution

The non-disclosure of assets held abroad and their remittance under PERA is a serious matter. Immunity from probes under PERA has nothing to do with provisions related to money laundering or disqualification of a public office holder on account of corruption or any other malpractice. It is obvious that the Special Assistant to Prime Minister on Revenue is not stating the correct position of the law and making false claims for the media. He made a public statement on November 17, 2016 in Karachi saying “the Government is against any amnesty” and “after passage of the Finance Bill 2016 property would be brought into the tax net and price of property would be evaluated by third party under notification of State Bank of Pakistan and real estate will no longer be a safe haven for black money”. Whatever happened to this claim?

The track record of the present regime shows that it has only been paying lip service to the claim of bringing back funds stashed abroad. In reality is doing just the opposite. 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”, Ishaq Dar concealed what happened in August 2014 when the then Chairman FBR was prevented from leading a delegation to Switzerland to re-negotiate the treaty.

The present government was fully aware of the fact that majority of Pakistanis offshore companies were registered in the British Virgin Islands (BVI), yet it 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 to invoke the Swiss law, Foreign Illicit Assets Act (FIAA) of 18 December 2015 for return of proceeds of kickbacks lying in Switzerland about which an order of the Supreme Court exists.

Pakistan is a unique country where the governments — military and civilian alike — have been frequently introducing tax amnesty schemes and passing laws that facilitate money laundering. Both the Legislature and Executive have always been shown keen interest in protecting not only tax evaders, but also extending facilities to terrorists, drug barons, and their likes to decriminalise their funds through obnoxious laws like PERA.

Due to abhorrent laws protecting dirty money, Pakistan has lost billions required for investment and betterment of society. Now the only hope is the Supreme Court, which can declare such laws to be in violation of the Constitution of Pakistan. In suo moto action under Article 184(3) of the Constitution, the court can pass a restraint order debarring the government to present any scheme aimed at decriminalizing of untaxed assets/funds. Unless it is done and law is enacted to confiscate unlawful or untaxed assets, criminals engaged in tax evasion, terrorist financing, corruption and money laundering will continue to play havoc with the state.

The writer, Advocate Supreme Court, is Adjunct Faculty at LUMS. Email: ikram@huzaimaikram.com; Twitter: @drikramulhaq

Published in Daily Times, February 11^th 2018.