The corrupt, tax cheats, 'secrecy' & RTI - I

2020 has started and apparently 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, which is still pending, 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 reported as PLD 2018 Supreme Court 686] 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 Muslims 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 did not take any action during the pendency of Suo Muto Case No. 2 of 2018 wherein old pending Constitution Petition No.72 of 2011, filed by Muhammad Ali Durrani, ex-Minister and former Senator, was also attached involving some common issues.

The present 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 is thus a test case for us as a nation 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. The important question is: how can 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:

(a) "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-to-day 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 Naib Nazim, Tehsil Nazim or Tehsil Naib Nazim or Union Nazim or Union Naib Nazim.

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 present Chairman of Federal Board of Revenue (FBR), 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-through a 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 2643 as 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.

The tall claims of premier Imran Khan, especially of reopening the cases of beneficiaries of asset whitening scheme of PMLN were exposed by Mohammad Ashfaq of 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 Chairman FBR 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 can be 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, Chairman FBR 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.

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 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.

(To be continued)

(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)