The shady paradise

The Federal Board of Revenue (FBR) has indicated that it will examine those Pakistani nationals whose names appear in the Paradise Papers, revealed by the International Consortium of Investigative Journalists (ICIJ) who are also credited with the release of the Panama Papers, and seek information from them about their ownership as well as other details including taxes paid. There are few expectations with respect to any meaningful investigation by FBR if its performance with respect to the Panama Papers is taken as a yardstick given that the Board was severely reprimanded by a five-member bench presided over by Justice Khosa for failing to verify documents nearly 11 months after the Panama Papers were first made public.
The Paradise Papers, according to the ICIJ website, made five key findings: (i) offshore interests and activities of more than 120 politicians and world leaders, including Queen Elizabeth II, and 13 Donald Trump advisers, donors and cabinet members; in the case of Pakistan, Shaukat Aziz was revealed to have offshore accounts which were set up prior to his appointment by Musharraf as initially the federal finance minister and later as the prime minister; however, once Aziz became a resident Pakistani, a requirement if he was to hold the executive positions that he held, he was legally bound to declare all his assets within and without the country. Thus he may have transgressed or violated the country's laws by not declaring the Paradise accounts though having the accounts was not illegal; (ii) exposed tax engineering of more than 100 multinational corporations, in Pakistan's case it is unclear whether any of the multinationals are being investigated or whether some of the very large domestic companies headed by prominent industrialists are engaged in such activity for the purpose of evading taxes; (iii) tax haven shopping sprees by multinational companies in Africa and Asia that use shell companies in Mauritius and Singapore to reduce taxes, a factor that clearly does not apply to Pakistan; (iv) shines a light on secretive deals and hidden companies connected to Glencore, the world's largest commodity trader, and provides detailed accounts of the company's negotiations in the Democratic Republic of the Congo for valuable mineral resources, again not applicable to Pakistan; and (v) details of how owners of jets and yachts, including royalty and sports stars, used Isle of Man tax-avoidance structures. In this context, it is disturbing that countries like the United Kingdom have tax havens and while they do get sanctimonious about their own politicians and/or the Queen using these tax havens yet they feel little compunction about the wealthy in other countries, particularly in developing countries, parking their wealth in such havens. Any meaningful debate on offshore accounts must, one would hope, lead to the entire world agreeing on zero tolerance on tax havens implying that they be declared illegal internationally.
Be that as it may, a distinction needs to be made between tax avoidance and tax evasion - the former considered a legal exercise to avoid paying taxes within the loopholes available in the tax system and the latter a deliberate attempt on the part of a resident not to pay due taxes which clearly is illegal and subject to penalties. A linkage between corruption and offshore accounts must be determined prior to taking any action and in this context, it is relevant to note that assets sourced to a crime, and corruption is a crime, is not time barred in Pakistan. Or, in other words, if a deceased grandfather's money was made through the commission of a crime his grandchildren cannot enjoy its fruits.
There is too much evidence of corruption within Pakistan's public life - be they government servants, state officials or politicians - and one way to deal with this is to make it mandatory for all such individuals to make annual disclosures of their assets as well as their dependents, both within and without the country. Such disclosures would enable the Directorate General of Intelligence and Investigation Inland Revenue to verify the data.