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

The passing of Foreign Assets (Declaration and Repatriation) Act, 2018, the Voluntary Declaration of Domestic Assets Act, 2018, promulgation of the Assets Declaration Ordinance, 2019 and later enacted as the Assets Declaration Ordinance, 2019 as part of Finance Act, 2019 were patently unconstitutional. Now what makes the situation more painful is the fact that the PTI, once valiantly opposed such laws and championed the right to access to information, is emerging as the zealous protector of tax evaders and looters of the national wealth by not only extending them amnesties/immunities but also lending full support and patronage, saving them from public exposure and punishment as per laws of the land!

This confirms that the beneficiaries of stolen and untaxed wealth have been and yet remain untouchable in Pakistan, and now further protection is assured to them in the name of inducing and promoting investment. The unlawful actions of the National Accountability Bureau (NAB), exceeding the given authority or to allay fear of businessmen from its alleged "draconian actions" should have been dealt with under the law awarding the responsible personnel punishment and heavy fines to be paid from personal pockets.

The National Accountability Ordinance, 1999, made effective from 1st day of January 1985, since its inception, covered "a holder of a public office, or any other person" if involved in "corruption" and "corrupt practices" as defined in section 9 of the said law. The definition of "person" as provided in section 5(o) in National Accountability Ordinance, 1999 says: "unless the context otherwise so requires, includes in the case of a company or a body corporate, the sponsors, Chairman, Chief Executive, Managing Director, elected Directors, by whatever name called, and guarantors of the company or body corporate or any one exercising direction or control of the affairs of such company or a body corporate and in the case of any firm, partnership or sole proprietorship, the partners, proprietor or any person having any interest in the said firm, partnership or proprietorship concern or direction or control thereof".

The Supreme Court of Pakistan upheld both the retrospective application of National Accountability Ordinance, 1999 [Khan Asfandyar Wali and Others v Federation of Pakistan and Others PLD 2001 Supreme Court 607] and also its applicability to persons other than "holders of public office" [Abdul Aziz Memon & other v The State & Others PLD 2013 Supreme Court 594], defined in section 5(m) of the said law. The Presidential Ordinance, National Accountability Bureau (NAB) Ordinance 2019 amending the law to allegedly protect the corrupt politicians, dishonest and crony civil servants, tax evaders and looters of national wealth is reportedly challenged in Supreme Court. Since the matter is sub judice, it is not appropriate to comment on it any further.

It is well-established that the role of National Accountability Bureau (NAB) in curbing perpetual and growing corruption since its inception has been highly disappointing. Even after submission and re-submission of reports of "mega corruption cases" before the Supreme Court, NAB has failed to prosecute a single big fish. But the important question is how Federal Board of Revenue (FBR) will proceed against those taken out of jurisdiction of NAB as majority has already availed Foreign Assets (Declaration and Repatriation) Act, 2018, Voluntary Declaration of Domestic Assets Act, 2018, Assets Declaration Ordinance, 2019 and Assets Declaration Act, 2019 as well as secured complete confidentiality? What mechanism and tools does it possess that can confirm that assets whitened were not created out of proceeds of crime? Against the men in power and parliamentarians, who could not even avail the above amnesties as clearly debarred, FBR in the past miserably failed to show any inclination to proceed against them. It is evident from Tax Directories of Parliamentarians, published by FBR from 2013-18 that vast majority of them declared meagre incomes that never matched their standard of living but no question is/was ever posed, let alone taking any action as is/was done in the case of many ordinary citizens.

In a press report, 'Parliamentarians, Imran, tax expert raises questions about outcome of audit' [Business Recorder, October 27, 2018] a vital question was raised: what was the outcome of cases of parliamentarians selected for audit through random balloting last year. What was the result of the audit of parliamentarians including Prime Minister Imran Khan whose case was selected for audit in the past?" It may be recalled that many parliamentarians were selected for audit for Tax Year 2015-16 through computer ballot using parametric selection mechanism but FBR failed to take appropriate action or at least never divulged the details of how much extra tax was collected. FBR is totally politicised and muzzled by men with money power and having track record of inefficiency and corruption as well as accommodating the government of the day and victimizing its political adversaries and is totally incapable of doing accountability the Prime Minister has been claiming would be done.

It is fully justifiable to take powers of tax probe from NAB, unless public officeholders are involved, but it is equally important to give full autonomy to FBR and other agencies from all outside influences, especially political subservience, to counter tax evasion, corruption and abuse of any state office for personal gains. In the past, we have witnessed a complete failure on this front. Let us recall what the Supreme Court desired and directed while exercising powers under Article 184(3) of the Constitution in its order of February 1, 2018 in Suo Muto Case No. 2 of 2018:

i) The State Bank of Pakistan shall before the next date of hearing submit a comprehensive report regarding steps which have been taken under the international agreements/treaties/protocols to identify the citizens who hold accounts in foreign jurisdictions, including UAE, Switzerland, Luxemburg, Spain, UK, etc. and other tax haven jurisdictions, including, British Virgin Islands, Cayman Islands, Channel Islands, etc.

ii) The State Bank of Pakistan, the FBR, the Securities & Exchange Commission of Pakistan and the Ministry of Finance shall submit report about the steps taken, in collaboration with other State institutions, for retrieval of the said money.

iii) The Federal Board of Revenue shall also submit a report providing details of the steps taken on the basis of information available, inter alia, through Panama Papers and Paradise Papers and the action taken against citizens holding properties and banks accounts in foreign countries.

iv) All State agencies including IB, ISI, MI and FIA arc directed to share all requisite information available with them with this Court.

v) The State Bank of Pakistan, FBR, the Ministry of Finance and Ministry of Foreign Affairs shall collaborate with each other, collect and share information and approach the afore-noted foreign jurisdictions to obtain such/other further information, as may be necessary, through legal and diplomatic channels".

What happened thereafter is history. The instructions of Supreme Court resulted into amnesties and immunities for the rich and mighty and the sufferers were the ordinary citizens of Pakistan. No action was taken for utter violation of Articles 19A and 79 of the Constitution and many other provisions that do not allow legislators to violate fundamental rights of the citizens and favour tax evaders and looters of the national wealth.

In the wake of Panama Papers: Politicians, Criminal & Rogue Industry That Hide Their Cash, published by International Consortium of Investigative Journalists (ICIJ), on April 3, 2016, heated debates started in every country for disclosures of information relating to matters falling in the category of public importance. In Pakistan people soon became disillusioned because nothing worthwhile happened [In other countries billions were recovered using the information]. On the contrary, the information of tax evaders and looters of national wealth was excluded from public access first by the Government of PMNL and then of PTI ignoring Article 19A of the Constitution.

The following articles were published in this newspaper but nobody bothered to consider and take remedial action for countering corruption, tax evasion and unlawful stashing of assets abroad:

1. Countering loot and plunder, Business Recorder, December 29, 2017

2. Paradise Papers: another wake-up call, Business Recorder, November 10 & 12, 2017

3. Offshore labyrinth, Business Recorder, October 27, 2017

4. Trail of hidden wealth, Business Recorder, May 6, 2016

5. Taxing undisclosed income and assets, Business Recorder, March 27, 2015

6. Probing Swiss accounts, Business Recorder, August 15, 2014

Unfortunately, nobody took note of the above. FBR, SBP, FIA, NAB and other agencies never cared to investigate matters repeatedly pointed out in these columns. The Supreme Court even in Suo Muto Case 2 of 2018 did not take cognizance of these otherwise a breakthrough could have been achieved if FBR was ordered, as suggested, to produce the entire record related to 2014 negotiations for new Tax Treaty with Switzerland. It could have unveiled the dirty tricks played by the government of PMLN to protect tax evaders and looters of national wealth.

The then Finance Minister, Ishaq Dar, now a fugitive, 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", did not tell the House what happened in August 2014 when the then Chairman FBR was prevented from leading a delegation to Switzerland to re-negotiate the treaty. Treaty renegotiated and inked after talks by Chief Taxes on August 24-26, 2014 was later blocked [details available in Pakistani cash in Swiss banks pulled out, The Express Tribune, February 22, 2017].

It is undeniable that although our governments were aware of the fact that majority of the offshore companies of Pakistanis were registered in British Virgin Islands (BVI), yet they 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 even for initiating any such move-see Foreign Illicit Assets Act (FIAA) of 18 December 2015 for known case of $60 million stashed by Asif Ali Zardari in Switzerland about which even order of the Supreme Court in Dr Mobashir Hassan and other v FOP and others PLD 2010 SC 265 was never implemented.

On October 1, 2010, the Swiss Parliament passed a law, The Restitution of Illicit Assets Act, 2010 (RIAA), empowering the Swiss Federal Tax Administration (FTA) to sign DTAs based on revised Article 26 of the OECD Model Tax Convention to cooperate with international requests for exchange of bank information of all kinds. In the wake of this development, many countries approached Switzerland to upgrade their DTAs to incorporate OECD's Article 26. The United States, Germany, France, the United Kingdom, the Netherlands, Qatar, and India after incorporating revised Article 26 of OECD started reaping notable tax revenue gains and receiving capital back from Switzerland. Our men in power tried to hoodwink the masses by saying that they were going for Organization for Economic Cooperation and Development (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters. They were just buying time to ensure that no information comes to Pakistan during the period of their rule! Now, PTI has finally made effective new treaty with Switzerland but they refused to give last years' data and prospective information for calendar year 2020, will come from September 2021[Switzerland refuses to share five-year-old information with Pakistan, The Express Tribune, December 17, 2019]!

Recently, the Swiss Parliament approved the automatic exchange of bank data with 18 additional countries from 2021 including Pakistan. Switzerland will provide details of bank accounts held by their citizens for January-December 2020 period only. The revised tax treaty between Switzerland and Pakistan became effective from January 1, 2019. The new tax treaty was signed in March 2017 but it took nearly two years before it was enforced. It replaced the 2008 tax treaty between the two countries. By not honouring the 2014 renegotiated treaty the government of PMLN facilitated many to transfer shady funds from Swiss banks. The treaty signed on March 21, 2017 was delayed for two years to take effect so that it would not yield the desired results. It confirms that the delay was intentional, willful and well-planned-though crafty politicians of PMLN kept on taking credit of taking actions in "national interest" merely to deceive the people! Instead of ordering inquiry in the matter, PTI is guilty of protecting the culprits!

Successive governments in Pakistan, unfortunately, have been adopting a policy of appeasement towards tax cheats and looters of national wealth. Even private efforts to invoke extraordinary jurisdiction of Supreme Court and High Courts to retrieve looted wealth and untaxed money have not been fruitful. On the contrary, the Indian Supreme Court took historic decision in the case of Ram Jethmalani and Other v Union of India [(2011) 8 SCC 1=2011 PTR 1933 (S.C. Ind)] and ordered 'Special Investigation Team' (SIT) to supervise the government-led investigations into black money belonging to Indians, lying abroad. One hoped that our Supreme Court would consider the case of Ram Jethmalani in Suo Motu Case No. 2 of 2018 wherein Constitution Petition No.72 of 2011 was also attached, but it never did so though the petitioner, ex-senator and former minister, Muhammad Ali Durrani, specifically raised it as well as invoked many other valid points in writing in a Miscellaneous Application, which will be published in some other article.

Judicious and meaningful exercise of fundamental right guaranteed under Article 19A can make all the four pillars of the State-Legislation, Judiciary, Executive and Media-accountable to the public at large. Right to information under the Right of Information legislation of federal and provincial governments in all matters of public importance, access to official record of FBR and other government departments (which is not secret) and free availability of what is owned by privileged classes must be assured. It will certainly help improve governance, democratic dispensation, transparency and ensure rule of law.

The exercise of constitutional right of access to information in all matters of public importance is necessary for transparency, accountability and good governance-essential elements of democratic dispensation. At the heart of Article 19A is ensuring accountability of all. Logically, the right to information must start from those who judge, adjudge and legislate. It is high time that all the laws relating to secrecy of assets/income/expenditures of mighty segments of society are withdrawn and their affairs be made public. It will be the first right step towards creditable process of accountability in Pakistan.

It is time that Supreme Court of Pakistan concludes Suo Muto Case 2 of 2018 and orders public disclosure of tax/asset/expenditure declarations of judges, high-level civil military officials and businessmen who have been beneficiaries of write-off of huge loans from banks, for transparency and as fulfillment of inalienable right guaranteed by the Constitution to citizens under Article 19A. As held by the Supreme Court, this right cannot be altered or abridged by a law enacted even by Parliament-Watan Party & Others v Federation of Pakistan & Other PLD 2012 Supreme Court 292. The Apex Court even went a step further to hold that the citizens could not be denied their guaranteed fundamental right under Article 19A by limiting or downplaying its scope through a elitist and/or narrowed construction through which information remains confidential with those in power.

In the light of dictum laid down in Watan Party & Others v Federation of Pakistan & Other PLD 2012 Supreme Court 292, binding under Article 189 of the Constitution, no person should hide behind the laws relating to "confidentiality" and "secrecy." There should be joint and non-partisan Standing Committee of National Assembly & Senate on Countering Corruption & Tax Evasion etc having access to record of FBR and all other departments. The record of FBR, Election Commission of Pakistan (EEC), State Bank of Pakistan (SBP), NAB, Anti-Narcotics Force (ANF) and Federal Investigation Agency (FIA) that is of public importance should be made available under the Right of Access to Information Act, 2017 without and restrictions and creating the myth of "security". Presently, there exists confusion and misconception in certain circles that Income Tax Ordinance, 2001 guarantees "complete confidentiality" for tax declarations as well as documents filed, and that tax officials cannot divulge the same in any circumstances. The correct position of law is different-there are many exceptions to this rule. In fact, FBR in the past has been publishing tax declarations of all taxpayers with the approval of the federal government.

Section 216(1) of the Income Tax Ordinance, 2001 says that all particulars contained in any statement made, return furnished, or accounts or documents produced or any evidence given, or affidavit or deposition made, in the course of any proceedings under this law or any record of any assessment proceedings or any proceedings related to recovery of a demand shall be confidential and no public servant save as provided in this Ordinance may disclose any such particulars.

There are many exceptions to this rule as contained in sub-sections (3), (4), (5), (6A), (6B) and (6C) of section 216. For example, it is clearly provided in sub-section (5) that nothing contained in sub-section (1) of section 216 shall prevent the Board from publishing, with the prior approval of the Federal Government, any particulars filed by any taxpayer and sub-section (6) in categorical terms states: "Nothing contained in sub-section (1) shall prevent the Federal Government from publishing particulars and the amount of tax paid by a holder of a public office as defined in the National Accountability Bureau Ordinance, 1999 (XVIII of 1999)." Sub-section (6C) says: "Nothing contained in sub-section (1) shall prevent the Board from publishing the names of offshore tax enablers, in the print and electronic media who have enabled offshore tax evasion".

FBR till today has not divulged the names of "offshore tax enablers, in the print and electronic media, who have enabled offshore tax evasion", rather it is denying the right to information in respect of recent deal/settlement signed between NCA of the UK and a Pakistani accused of offshore tax evasion of £190 million. Under section 216(6C) of the Income Tax Ordinance, 2001 and in terms of Article 19A, it is proactive duty of FBR to publish complete information of this settlement which the government of PTI wants to keep secret for reasons best known to it!!

It is understandable why we have failed to counter corruption and tax evasion. It may be remembered that about 70% of Pakistani legislators-members of Senate and National Assembly-were exposed for not complying with section 116(2) of the Income Tax Ordinance, 2001 by not filing tax returns, wealth statement and personal expenses having taxable income of Rs. 500,000 in tax year 2011. Instead of being ashamed of their misconduct and violating the law of the land, they accused FBR for "illegally" disclosing data. FBR was also proven guilty for not taking any action against these defaulters and many of its own and other government officials for not complying with tax laws. Even after furious campaign by us and others forcing legislators to file returns and wealth statements, tax directories published since 2013 show farcical quantum of incomes declared by majority of legislators vis-à-vis their assets and standard of living! But FBR continues to behave like a silent spectator and a totally ineffectual body. Till today, it has failed to get returns from all legislators, political parties, doctors, lawyers, schools, business houses, deeni madrassahas (religious schools) and NGOs-just to mention a few!

It is, however, worth pointing out that violation of tax laws is not confined to parliamentarians. The elites-militro-civil bureaucracy, landed aristocracy, politicians, religious and spiritual leaders (ulema and pirs), loan beneficiaries, unscrupulous business tycoons-flout laws of the land with impunity and take pride in it. Since assets and tax declarations of powerful militro-civil-judicial hierarchy are not available, the citizens cannot know how much state land was given to them on throw-away prices and whether they paid tax on differential of market value as envisaged in section 13(11) of the Income Tax Ordinance, 2001 for this and other similar favours at taxpayers' expense. This is the stark reality of Pakistan-legislators make a mockery of laws enacted by themselves, and the mighty militro-civil-judicial complex takes cover under special laws to avoid public disclosure of assets and tax declarations-availing offshore facility for them is itself a big proof!

There is a formidable resistance from all politicians for establishment of an independent accountability authority in Pakistan as they know that such a body would expose their corruption and end their control over the State. The way forward is that political parties should be forced to keep proper accounts, get them audited by reputed firms and file tax returns on a regular basis. Once this is made mandatory under the law, they would have no option but to take into their folds only those people who honestly discharge their tax obligations. The process of filtration within the parties is a necessary step towards a true democratic culture. Election Commission should concentrate on this aspect of the matter to fulfill its constitutional liability under Article 218(3) and political parties must ensure in-house accountability and through an independent accountability agency that is under direct control of judiciary and not executive. Its members and chairman should be appointed through public hearing in a joint House Committee for Accountability for which, proper legislation should be initiated without any further loss of time.

(Concluded)

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