It is widely reported in media that during the meeting between Prime Minister and Chief of Army Staff on May 10, 2016, a loud and clear message was conveyed from men in khaki to men in mufti "to avoid the protracted controversy over the Panama Papers investigation." Reportedly, General Raheel Sharif told Nawaz Sharif that tussle over the Panama Leaks was "affecting governance and national security." It was suggested to the Prime Minister that "the issue needs to be urgently brought to a close."
In the wake of a meeting between Prime Minister and Chief of Army Staff, the Opposition told media that it intended to pose seven questions in the National Assembly and Senate about the sources of assets owned by the family of Prime Minister as well as mode of transfer of funds from Pakistan or elsewhere. Nawaz Sharif is expected to answer these questions and make out his case today [May 13, 2016].
The Opposition is oblivious of the discrepancies and omissions that emerge from the nomination papers filed by Nawaz Sharif in 2013. It is strange that they do not do their homework. Unfortunately, instead of adopting the right legal course, they intend to resort to steps that would only benefit the tax cheats and plunderers of national wealth. This article highlights the crux of the issue and suggests the right actions that can ensure accountability and transparency in Pakistan.
In the Panama Leaks I and II, at least five offshore companies of offspring of our Premier have surfaced. In these companies, addresses of Saudi Arabia and Russia are used, while admitting ownership of expensive properties in London and elsewhere. Using offshore companies, loans worth millions of pounds were obtained from banks in Switzerland and Britain. Though the Panama Papers contain names of several other politicians and businessmen, but there is broad consensus among the Opposition in Pakistan that the probe should start with the Prime Minister and his family. They allege that actual investment in properties is by the Prime Minister and children are just benamdar (name lenders).
There is no denial by the Prime Minister till to this date of the fact that five offshore companies are managed by his offspring (Hussain, Hassan and Maryam) and luxury properties in London are owned through offshore companies and trusts. He also did not refute businesses conducted abroad by his sons. Prime Minister and his ardent defenders are adamant that "nothing wrong is committed". But Opposition believes that though "ownership of properties is confessed", the sources of investment and disclosures are missing in the local tax record. Was it mandatory for Prime Minister to make such disclosures? We intend to answer this vital question.
Nawaz Sharif, who is believed to be a billionaire twice over, is presently being probed by many, including the Transparency International. The entire episode, especially linkages with offshore companies for buying expensive properties abroad, is tarnishing the image of Pakistan. Thus, anxiety of military leadership is understandable. The hostile elements in US Senate even used it as a pretext to block F-16 sale. One wonders what is preventing the Prime Minister to present the evidence and shut all the mouths at home and abroad. It is in his and the country's best interest. Hopefully, he will do it as early as possible to avoid further embarrassment for Pakistan internationally and political chaos at home.
Our investigation shows that numerous questions and dichotomies arise from documents contained in the Panama Papers and those filed by Nawaz Sharif, First Lady, Maryam Safdar (strangely her CNIC 2520158274244 shows name as 'Marriyam Safdar' and under this name she obtained National Tax Number 1308504-2 on 12th October 2001 c/o Chaudhry Sugar Mills) and Mohammad Safdar (husband of Maryam and member National Assembly), before Election Commission of Pakistan (ECP) and/or Federal Board of Revenue (FBR).
The total number of discrepancies and omissions are over 40 but the most ones are:
1. There is no disclosure by Prime Minister of any asset abroad of any of his dependents, though in his nomination papers, filed with ECP in 2013, he showed Maryam as dependent! It is admitted fact (the Panama Papers and interview of Hussain Nawaz) that Maryam has been sole owner of two BVI companies and also co-owner of one BVI company. She signed loan papers to secure funds against London properties. Even her husband Mohammad Safdar (as per website of National Assembly his permanent address is Jati Umrah, Raiwind Road) did not disclose assets of wife in his nomination papers. It is pertinent to mention that in 2011, Nawaz Sharif showed land worth Rs 24,851,526 in the name of Maryam Safdar as dependent!
2. First Lady in Tax Year 2012 declared income of only Rs 2,136 as profit from a bank account. She gave a loan of Rs 1,650,000 to mother-in-law and Rs 1,100,000 to one Farooq Barkat. She showed shares worth millions in four companies. In Chaudhry Sugar Mills her holding was shown at 506,147 shares (worth Rs 5,126,720). She received no dividend from any company! She also showed liability of Rs 500,000 as business capital overdrawn in the name of her younger daughter (Asma Ali Dar). No business connection is shown by Prime Minister though spouse has shown the same. Nawaz Sharif under the law was bound to show all the assets/liabilities of spouse and dependents.
3. The father of Prime Minister, the late Mian Muhammad Sharif, was owner of London property as per order of Queen Bench, London in the case of recovery of loan from Hudabiya Mills by Al-Towfeek Investment Bank. On his death, shares of Hudabiya Paper Mills were inherited by Prime Minister but property was not! This needs thorough probe and explanation.
4. The Prime Minister showed liability of Rs 110,000,000 in respect of Ramzan Sugar Mills as on 30-6-2011. The total net worth declared was Rs 149,398,035 (in 2010 net wealth was Rs 63,737,827). Total expenses were shown at Rs 19,878,706. No information is provided as to who was paying expenses of palatial Raiwind Palace (in papers it is shown as Shamim Farms in the name of mother who has no resources to bear its expenses).
5. Nawaz Sharif as per nomination papers filed in 2013 with ECP for contesting elections in 2013, showed total net wealth as on 30-06-2012 at Rs 261,659,827 and as on 30-06-2011 at Rs 166,049,542 showing accretion at Rs 95,610,542 whereas comparative analysis of wealth statements filed in income tax department for Tax Year 2011 and 2012 is tabulated in Table 1.

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                                            Tax Year 2011      Tax Year 2012
============================================================================
Net Wealth on 30th June                       149,398,035        244,995,207
Net Wealth on previous 30th June               63,737,827        149,398,035
Increase in Net Wealth during the year         85,650,208         95,597,172
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As per income tax/agricultural income tax returns, attached with the nomination form, the total income from all sources and personal expenditure are shown in Table 2.

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Tax       Total Income       Personal    Surplus for
Year  from all sources    Expenditure    Accretion in
         (Salary, Bank                   Net wealth
          Profit,  Agriculture)          Personal expenditure exceeds income
=========================================================================================
2012        20,930,546     24,096,786    from all sources. There is, in fact, deficit of
                                         Rs 3,166,240 Again personal expenditures exceeds
2011        15,779,745     19,878,706    income from all sources and there is deficit of
                                         Rs 4098961
=========================================================================================

6. From the aforesaid Table it is evident that out of declared and taxed income, no sources were available for accretion in net wealth over the period from 30.06.2010 to 30.06.2012. However, net wealth increased from Rs 63,737,827 as on 30.06.2010 to Rs 244,995,207 as on 30.06.2012, which was beyond the available (offered for tax) sources of income.
7. No Pakistani citizen can open foreign currency account exceeding US $1000 or equivalent in any other currency abroad without the approval of State Bank of Pakistan. Nawaz Sharif declared in 2011 foreign currency account in Jeddah with a balance more than the prescribed limit. After returning to Pakistan from what he called exile and before contesting elections, he should have closed this account or obtained approval from Pakistan.
8. That as per wealth reconciliation statement for tax year 2011, Nawaz Sharif showed the following gifts during the year:

======================================================
Gift to Daughter - Mrs Maryam Safdar     Rs 31,700,000
Gift to Son- Mr Hussain Nawaz            Rs 19,459,440
======================================================

Whereas Muhammad Safdar, husband of Mrs Maryam Safdar, in his statements of assets & liabilities as on 30.06.2011 to the ECP, as published in the Official Gazette, showed "no change in the assets during the year". If the amount was gifted to the daughter through a cross cheque as required under the law, the husband was bound to declare it. It might have been an afterthought to reduce the net wealth as the accretion was substantial and Nawaz Sharif could not justify the same from his declared/taxed sources.
9. Nawaz Sharif, in his nomination papers, attached 'Wealth Reconciliation Statement for Tax Year 2011' on the format prescribed under the Income Tax Rules and this is reproduced in Table 3.

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PARTICULARS                                                  AMOUNT
===================================================================
Net Assets as on 30.06.2011                             149,398,035
Net Assets as on 30.06.2010                              63,737,827
Increase in Assets                                       85,660,208
-------------------------------------------------------------------
SOURCES
-------------------------------------------------------------------
Income declared                                          10,200,000
Agricultural Income                                       5,075,000
Bank Profit                                                  97,257
Gift from Son                                           129,836,905
Foreign currency translate / conversion effect            1,489,192
Total Sources                                           156,698,354
-------------------------------------------------------------------
LESS: EXPENDITURE
-------------------------------------------------------------------
Personal Expenditure                                     19,878,706
Gifted to Daughter - Mrs Maryam Safdar                   31,700,000
Gifted to Son - Mian Hussain Nawaz                       19,459,440
Total Expenditures                                       71,038,146
Balance available for increase (156698354 - 75238146)    85,660,208
===================================================================

10. From Table 3 it is evident that the accretion is on account of gift from the son of Rs 129,836,905. This gift raises many questions. For example, as per section 39(3) of the Income Tax Ordinance, 2001 any amount claimed as gift should be received either through a cross cheque or through a banking channel from a person holding a National Tax Number. Admittedly, Hussain Nawaz was not an NTN holder. This amount was to be offered as income even if received through banking channel, which Nawaz Sharif had failed to do. This needs probe.
11. That as per Annex-B of return of total income for Tax Year 2011, the tax collected by bank on cash withdrawals has been shown at Rs 333,330 which when worked back at the prescribed rate of 0.3% comes to cash withdrawals of Rs 111,110,000. Such heavy cash withdrawals and their utilisation need to be probed.
12. As mentioned earlier, section 39(3) of the Income Tax Ordinance, 2001 requires that gift should have been through a cross cheque or a banking channel from an NTN holder (failing which these are to be treated as income of recipient). Gifts through prescribed modes are not shown by Maryam Safdar or her husband. As admitted, a huge amount of Rs 111,110,000 was withdrawn in cash from bank accounts by Nawaz Sharif. This indicates that the gifts of both the amounts were aimed at reducing the net wealth to match the available resources. If these gifts were in violation of section 39(3) of the Income Tax Ordinance, 2001 then both Hussain Nawaz and Maryam Safdar are guilty of avoiding tax. However for colourful transactions, action under sections 108 and 109 of the Income Tax Ordinance, 2001 is to be taken against the Prime Minister.
13. It is worth noting that 'wealth statement' is prescribed under the Income Tax Rules, 2001, and as provided under section 116(1) of the Income Tax Ordinance, 2001 it must contain the following particulars of:
a. Person's total assets and liabilities
b. Total assets of the person's spouse, minor children and other dependents
c. Any asset transferred by person to others during the year
d. Total expenditure incurred by the person and the person's spouse, minor children and other dependents
e. The reconciliation statement of wealth
14. Nawaz Sharif, contrary to the provisions of section 116(2) of the Income Tax Ordinance, 2001, did not file Wealth Statement with the return of total income. He did not comply with the law even when pointed out through a note on the Acknowledgment Slip. In fact, Wealth Statements for the Tax Year 2012 and 2011 were filed just before the filing of nomination papers with detail are shown in Table 4.

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Tax             Date of filing    Date of filing of
Year                 of Return     Wealth Statement
===================================================
2012                09.10.2012           22.03.2013
2011                21.11.2011           21.03.2013
2010                30.10.2010        Not Available
===================================================

15. As per Sr. No 4 of the FBR's guideline to ECP for determination of tax default in cases where filing of 'wealth statement' was obligatory, the following were to be checked that whether the same has been filed:
-- Along with the tax return
-- After filing of tax return or
-- Has yet not been filed
However, the Returning Officer did not follow the guideline and late filing of more than one year was ignored as tax default for applicability of Article 62(1)(d) of the Constitution of Pakistan.
16. Nawaz Sharif, after returning to Pakistan in late 2007, filed wealth statements for tax year 2011 and 2012 on March 21 and 22, 2013 respectively. He did not file wealth statements from 2007 to 2010 to justify increase in assets vis-à-vis wealth statement filed as on 30.06.2007 with nomination papers for 2008 general elections. Why were these statements not filed in time? It is strange that wealth statements were filed just before filing the nomination papers but default for late filing was ignored both by FBR and ECP.
17. Why FBR did not take any action for late filing of wealth statements that is an offence specified in Table given under section 182(1) of the Income Tax Ordinance, 2001. It attracts penalty up to 25% of the amount of tax payable. The tax payable amount as per Acknowledgment Slips for these years shown in Table 5.

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Tax Year    Tax chargeable                    Maximum Penalty
                                   Sr. No       under Sr.No 1
                 Amount           of Return      of Table u/s
                                                182(1) Amount
=============================================================
2012          2,207,118               44              551,780
2011          2,224,466               42              556,117
2010          2,012,979               38              503,245
=============================================================

At the time of filing nomination papers in 2013, Nawaz Sharif was head of PML(N) and twice enjoyed the post of Prime Minister, yet he violated the command of law (Income Tax Ordinance, 2001). He was not eligible candidate in terms of Article 62(1)(d) as well as 62(1)(e)/(f) of the Constitution.
18. In the nomination papers, Nawaz Sharif mentioned that that he was living with his mother. Therefore, it is understandable not to declare cost of furniture, fittings and articles of personal use. But it is surprising that personal effects that include expensive watches he display with pride, are totally missing! These are not even shown as gifts though many cars are!
19. As per assets declarations from 2011 to 2013, Nawaz Sharif has been receiving huge gifts through remittances from Hussain Nawaz. Since he is not an NTN holder, the entire amounts become chargeable to tax under the Income Tax Ordinance, 2001. Secondly, Hussain never showed these amounts in his UK returns. In other words, offshore accounts have apparently been used to send these funds.
20. Sr. No 14 of the 'Nomination Form' pertains to agricultural income tax and asks for last three years agricultural income and tax paid thereon and to attach copies of the agricultural income tax returns as well. The returns attached by Nawaz Sharif indicate that these were also filed just before the filing of nomination papers the details of which are given in Table 6.

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Assessment         Due Date     Date of Amount of tax paid         Delay in
Year         Under Rule (5)   filing of with the return as       Payment of
              of the Punjab      Return     required under         Admitted
               Agricultural                Rule (4) of the              Tax
                 Income Tax                         Punjab     Liability as
                Rules, 2001                   Agricultural          well as
                                         Income Tax Rules,        filing of
                                                      2001           Return
===========================================================================
2012-13          30.09.2012       22.03.2013    1,195,497          6 Months
2011-12          30.09.2011       22.03.2013      715,250         18 Months
2010-11          30.09.2010       22.03.2013      734,000         30 Months
===========================================================================

There was a delay in discharge of tax liability in time. Article 63(1)(o) takes care of default in payment of government dues of over Rs 10,000 over a period of 6 months. Tax of three years was paid on 22.03.2013 just before filing nomination papers that attracts Article 62(1)(d), (e) and (f) of the Constitution.
21. Both in tax year 2011 and 2012, Prime Minister showed salary income from Chaudhry Sugar Mills in which he claimed 2,012,538 shares [valued at Rs 16,000,000]. He virtually controls this entity. Even after becoming Prime Minister on the website of Sharif Group of Company, his message as head of Sharif Group of Companies and Chairman Board of Directors is appearing with the following message:
"Maintaining customer confidence and trust has become increasingly important in today's global business environment. We at Sharif Group have to follow our past tradition of commitment and customer satisfaction set by our Late Chairman Mian Sharif at all times. We are strongly committed to implementing policies and procedures that reflect ethical business practices. We are committed to the pursuit of excellence, and we will continue evaluating ways to strengthen our policies and practices to promote the interests of our customers."
Is it appropriate or lawful for the sitting Prime Minister to head a group of companies and continue as Chairman Board of Directors? It is also noteworthy that in Chaudhry Sugar Mills loan of US20 million was received from an offshore company established by a bank as per statement [Chadron does not belong to PM or family: SBP chief, Business Recorder, April 11, 2016] of Governor State Bank.
22. As per income tax returns, Nawaz Sharif has been receiving income from Chaudhry Sugar Mills Ltd without rendering any services. It was just an arrangement to show some income tax payment. In substance, the company saved 35% tax by booking fake expense. Since, he never rendered any services to the company, FBR was duty bound to disallow this expense using sections 108 and 109 of the Income Tax Ordinance, 2001.
The Prime Minister is under moral and legal obligation to explain the above as well as sources of investment abroad by his children. He alone can provide this information. Obviously nobody else possesses this information. Since assets and liabilities are declared by the Prime Minister in nomination papers and ownership of foreign assets and offshore companies is admitted by his children and wife, they all must explain their details.
The replies to above questions/issues should not be sidetracked by the Government or Opposition on the pretext of investigation through judicial commission or inquiry committee or task force. People of Pakistan want accountability of all and this time no one should be allowed to reach another political compromise like the infamous NRO!
Nobody has so far raised the point as to why Nawaz Sharif did not declare assets/liabilities of Maryam Safdar though claimed to be dependent in 2011 and 2012 in declarations filed before Election Commission in 2013. It is also questionable why Mohammad Safdar failed to declare assets of his wife when father-in-law says gift of Rs 31,700,000 was given on 31-06-2011! Maryam Safdar became the sole shareholder of Nescoll in 2006 and a letter to this effect was filed with Mossack Fonseca. She was also co-owner in another BVI company, Coomber Group, through which in June 2007 loan of £3.5m was secured from Deutsche Bank. By not disclosing interests/assets/loans in offshore companies of Maryam Safdar, Nawaz Sharif and/or Mohammad Safdar in 2013 apparently violated section 12(2)(c)&(d) of Representation of People Act, 1976.
It is high time that instead of destabilising Pakistan by creating commotion and wasting precious time for judicial inquiry, Opposition may invoke Articles 62 and 63 of the Constitution and/or the Representation of People Act, 1976. Law is there to deal with misdeclarations(s) by public officeholder and they can be disqualified if found guilty. However, it appears nobody is serious about it. Forces that matter want perpetuation of corruption and are trying their best to create confusion so that the guilty can be protected. The other day in a TV show, the head of a leading chartered accountancy firm was pleading yet another amnesty for tax cheats! People are also showing apathy without realising that the future generations will never forgive them for their inaction and silence.
(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at the Lahore University of management Sciences (LUMS). The views expressed in this article are not necessarily those of the newspaper)