NAB thriving on corruption!

According to a press report, Chief Justice Iftikhar Mohammad Chaudhry, while hearing the case of Harris Steel Mills on February 22, 2010 "was startled to learn that the National Accountability Bureau (NAB) had a legal claim on money it had recovered from the accused in the Rs 9 billion Bank of Punjab loan scam, and suggested that its officers quit their jobs and set up a recovery agency.
Every department will come and claim money tomorrow if this practice is allowed". The Chief Justice inquired from the NAB about the laws that authorise it to get the money. The NAB failed to satisfy the apex court under what law it was claiming 40 percent (up to 25 percent from the complainant and 15 percent from the accused) of the total amount recovered in financial crimes.
An investigating officer of the NAB, present in the court, referred to a notification issued on July 6, 2000 for retaining the money out of recovered amount, but the Financial Crimes Director of the NAB expressed ignorance about any law to justify claim over recovered money.
This shows how the NAB has been working - taking a huge commission without any lawful authority. It is a matter of concern that the NAB has not only miserably failed in combating corruption but also unlawfully squandered money from public funds looted by the crooked. One the one hand, the nation is suffering economically due to colossal revenue losses, fiscal crimes, corruption and financial frauds and, on the other the agency - established to combat these menaces - is guilty of axing 40% commission from the recovered amount!
What has NAB done to unearth and seize black money? It never seized enormous untaxed money grabbed by public office holders and bureaucrats. On the contrary, the NAB has been a co-sharer in the looted public funds. The problem of money laundering and tax evasion already poses a serious challenge to our state.
Successive governments have been shamelessly appeasing the tax evaders through various amnesty schemes, which continue to fail miserably while black economy keeps growing rather than showing any decline. The top tax managers sitting in the NAB and the Federal Board of Revenue (FBR) are hand in hand with plunderers of the national wealth and the result is before us - the entire state structure is fast crumbling.
The people, hooked on ill-gotten wealth, for the last many decades know for certain that after every two or three years, there will be an amnesty scheme giving them a chance to purge their income/assets by paying far less an amount than what they are required to pay under the normal income tax/wealth tax regime.
It is a tragic situation where the entire state apparatus is subservient to those who blatantly manage to conceal their income and wealth. It is an ugly joke with those, who have been paying their taxes honestly at much higher rates than those offered to tax evaders for whitening their ill-gotten wealth.
Behold the recent declaration of the members of the National Assembly-none of them disclosed any tax paid on incomes from which their monstrous wealth had been created. Since 1979 (courtesy General Zia-ul-Haq's legacy of speed money culture religiously followed by all the subsequent governments), Pakistan's underground economy has been growing at an alarmingly rate of 20% per annum.
There are multiple factors leading to this phenomenon, most notably the state-sponsored corruption and deliberate tolerance to malpractices. Pakistan, by all means has a soil, which has proved to be very fertile for the proliferation of an underground economy since the very early days of independence when the allotment mafia came into existence whereby many notorious elements turned rich overnight. They are still dominating the ruling structures by wielding their money power, which they have achieved without putting any effort in achieving it.
The NAB was established to provide effective countermeasures for eliminating corruption that generates black money - its job was to arrest and punish the wrongdoers. But it proved to be yet another government department, minting money for self-aggrandisement! It is well-established now that the NAB was used to victimise political opponents of its mentor rather than cracking down on those engaged in massive corruption, financial crimes and tax frauds.
People of Pakistan were told that the NAB would nab the corrupt and the influential. However, facts prove that it is just another inefficient and corrupt state organisation that has grabbed billions of rupees looted by the corrupt from the national exchequer.
Tax evaders, rent-seekers, mafias engaged in organised crimes, drug barons and smugglers, responsible for colossal revenue loss to national exchequer, were not nabbed by the NAB and if at all some of them were arrested, huge commission was taken by the agency as commission.
To counter the menace of corruption by the state functionaries and holders of public offices, tall claims were made by the NAB, but practically it was a tool in the hands of rulers of the day - military and civilian alike - for political victimisation of the opponents.
This institution only protects the mighty and grabs those who refuse to share their ill-gotten wealth or budge before the rulers of the day. The NAB played a very dirty role in securing "political allegiance" for Musharraf. After coming into power, Zardari et al - beneficiaries of the infamous National Reconciliation Ordinance 2007 - decided to dump the NAB and bring a new enactment in the house to replace it, but till today no tangible progress has been achieved towards this goal.
Unfortunately, Pakistan has become a place where rampant and institutionalised corruption has become a way of life. In tandem with this silent conspiracy is the fact that the laws against racketeers are not enforced and if they are, the penalties are derisive, eg cases of Mansoorul Haq, Mian Iqbal Farid and many others handled by the NAB in the past.
Money (of all kinds), from whatever source it comes, is the catchphrase in our society: aid money, commission money, drug money, American money [in exchange for fighting war against terrorism (sic)], and 'black' money (which one can 'whiten' by just 'remitting' through normal banking channels!). One just needs to go to a licensed money exchange company, pay a premium and telegraphic transfer to one's account is instantly arranged.
A very simple way of money laundering and no questions asked even by the tax people [section 111(4) of the Income Tax Ordinance 2001 gives full protection to such sham transactions].
And the proof of its lavish expenditure is prominent: in the ostentatious sprawl of new urban development, in the gleaming rows of foreign cars on the streets, in the smugglers' markets, brimming with the latest in foreign electronic gadgetry and in the shops crammed with foreign goods. Who says this is a poor country? The government is poor, but the people are very rich - see the large number of rural people going to Umrah these days, spending lavishly after getting good support price for bumper wheat and rice crops.
The chief preoccupation of this nation is money. Everybody is yearning for luxurious living while their fellow countrymen are dying of hunger and diseases (see the misery of Internally Displaced Persons in open camps). This mad race for money and outlandish living explains why the society as a whole has become indifferent to corruption. The general attitude is of helpless resignation, an acceptance of the defeatist principle that if one is to survive, one must play the game.
The bleak side of the picture is that the persons, who are capable of checking this distortion, the politicians and bureaucrats, are unlikely to oblige: for it would sever their financial lifelines. It is an incontrovertible fact that the income gap among the Pakistanis has been gradually widening and the trend of rich becoming richer and the poor poorer is gaining strength.
Generally, the analysts have attributed it to economic policy, but they have neglected the impact on income distribution of tax revenue losses generated by the underground economy. Virtually, all types of hidden incomes arising from vast and widespread underground economic activities have escaped tax regulations and this should be considered as an important cause of the widening of the Pakistanis' income gap over the last 30 years.
Time has come that the State gives up its policies of appeasement towards plunderers of the national wealth and tax evaders. The foundations of corruption and rent-seeking activities of the state functionaries and holders of all public offices have to be destroyed with full force if we have to progress as a democratic nation.
If the government demonstrates political will by confiscating all ill-gotten assets for the welfare of the poor, the citizens will certainly reciprocate by paying their taxes diligently and honestly. This will control and eliminate corruption in Pakistan.
If the system is to be prevented from sinking into greater chaos and ultimate collapse, corrective actions must be taken forthwith, the starting point being a clear recognition of the role of the state - especially its chief organs ie legislature, judiciary and executive to work pro-actively. The state will have to vehemently direct its entire energies to enforcing the laws that protect the public from cheats and racketeers rather than reinforcing a system which protects and encourages them.
This requires a bold and clean leadership capable of restraining the ballooning state and proclaiming this unpalatable truth, and setting standards for the rest of the citizenry. Unless such a leadership emerges and acts fast with the help of masses, no positive results can ever be achieved in fighting corruption no matter how many institutions like the NAB are dismantled or new ones formed on their ruins.
(The writers, tax lawyers, are Visiting Professors at Lahore University of Management Sciences (LUMS))