All public power is a sacred trust, which is to be exercised fairly, justly, honestly and in accordance with law-Supreme Court in Workers' Party Pakistan & Others v Federation of Pakistan & Others [PLD 2012 Supreme Court 681] In the wake of cases of disqualification filed by rival politician against each other for concealing assets and/or tax evasion, money laundering, telling lies etc, people of Pakistan are further disillusioned about the conduct of their leaders and elected representatives vis-à-vis discharging their tax obligations. They have been stunned to know that section 5 of the Protection of Economic Reforms Act, 1992 and section 111(4) of Income Tax Ordinance, 2001 are still in operation protecting money launderers and tax evaders. They ask whether it is good for the State to have such laws that guarantee complete immunity if illegal proceeds and untaxed funds are remitted in Pakistan through normal banking channels. They are horrified to learn that majority of elected representatives from all parties have very poor tax record. Their declared income/sources do not consummate with the standard of living they enjoy and assets possessed.
Many years back, the Center for Investigative Reporting in Pakistan (CIRP) in its reports, Taxation by Misrepresentation and Representation Without Taxation: CIRP's Report Unmasked Tax Evasion In Parliament, exposed how income tax law was violated with impunity by elected representatives. But till today no action is taken by Federal Board of Revenue (FBR) or National Accountability Bureau (NAB). Quoting CIRP, Sunday Telegraph way back on May 5, 2013 posed the question as to how public officeholders in Pakistan openly defy tax laws and get away with it. NAB, FIA and FBR are still showing inaction even after Panama Papers and judgement of Supreme Court in Panama case [Imran Ahmad Khan Niazi v Mian Nawaz Sharif & 9 Others-CP No 29 of 2016.
Section 5(m) of National Accountability Ordinance, 1999 (law is effective from 1985) includes in the definition of 'public officeholders' all existing, former and incumbent presidents, governors, prime ministers, chairmen and deputy chairmen Senate, speakers and deputy speakers, federal ministers, ministers of state, advisors, special assistants as well as political secretaries to the prime minister, parliamentary secretaries, members of parliament, and auditor general. It also covers anybody who has been an officer or had been holding a 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 or in the management of corporations, banks, financial institutions, firms, concerns, undertakings or any other institution or has been the chairman or vice chairman of a district council, a municipal committee and metropolitan corporation.
The ruling elites in Pakistan not only defy tax laws with impunity and make mockery of laws enacted by Parliament, but also squander tax money (extorted from the ordinary citizens) for self-projection-even defending their personal cases in courts. They enjoy unprecedented perquisites and benefits (for entire family and clan), foreign visits and luxurious living at the expense of the national exchequer. The institutions that have to generate taxes, check corruption, make public officeholders accountable and safeguard public funds are captive in the hands of rulers of the day. Loyalists and cronies are appointed heads of such institutions. The Chairman National Accountability Bureau (NAB) and Chairman Federal Board of Revenue (FBR) have been admonished in the judgement delivered by five member-bench of Supreme Court of Pakistan on April 20, 2017 in the famous Panama case [Imran Ahmad Khan Niazi v Mian Nawaz Sharif & 9 Others-CP No 29 of 2016].
The following observations by honourable judges that pertain to extreme callousness of heads of NAB and FBR in probing Panama Leaks are clear indictments against them, yet they are holding onto their offices (rather extension has been given to Chairman FBR till 30 June 2017 on his retirement on 24 April 2017):
Per Justice Asif Saeed Khan Khosa:
"133. It is unfortunate that despite a passage of over one year since surfacing of the Panama Papers the Chairman, Federal Board of Revenue, respondent No 5, has taken no serious step and has made no meaningful effort towards playing his due role in probing into the matter so as to find out whether any illegality had been committed by anybody in the matter or not. Except for issuing a few notices and writing a few letters the Federal Board of Revenue has not pursued the matter at all and such inaction and apathy can only be attributed to lack of will and dereliction of duty. The same is the case with respondent No 2 namely Mr Qamar Zaman Chaudhry, Chairman, National Accountability Bureau who appeared before this Court and maintained that the National Accountability Bureau was cognisant of its duties and responsibilities in connection with the issues arising out of the Panama Papers but respondent No 2 was waiting for the "regulators" to look into the matter first. We repeatedly asked him to elaborate as to who those "regulators" were and where did they figure in the National Accountability Ordinance, 1999 but he did not even bother to respond to those questions and conveniently kept quiet!"
Per Justice Ejaz Afzal Khan:
"In the normal circumstances this job could well be done by NAB, but when its Chairman, in view of his conduct he has demonstrated in Hudaibya's case by not filing an appeal against a split verdict of the Lahore High Court, appears to be indifferent and even unwilling to perform his part, we are constrained to constitute a joint investigation team (JIT)......"
Per Justice Sh. Azmat Saeed: "The Chairman, NAB shamelessly defended the decision of not filing an appeal. Interestingly, appeals are filed by the NAB before this Court in routine but not in this case. We believe that a population census is in progress. It is expected that the population of Pakistan would be more or less 200 million. If out of the 200 million people of Pakistan the only person, we can find to head over Premier Anti-corruption Institution is Respondent No 2, we might as well legalise corruption".
Per Justice Ijaz Ul Ahsan:
"22. After hearing the Chairman, FBR we are constrained to express our dissatisfaction and extreme disappointment on the mode and manner in which the premier taxation authority of the country has dealt with the matter".
One needs not to be a legal expert to conclude after reading the above strictures by the honourable judges that Chairman NAB and FBR could not continue after the judgement. These two important institutions, and many others, should be insulated from all out influence, especially political control. Their independence should not be merely on paper but it must be demonstrated in practice.
The concise statements filed in the Supreme Court by the incumbent Prime Minister and his offspring admit that Maryam Safdar was beneficial owner of the offshore companies (and by virtue of that, owner of Mayfair flats in London) from February to July 2006. She failed to declare this fact in her tax declarations for Tax Year 2006 (1 July 2005 to 30 June 2006). It is admitted that on 04.7.2006, yet another Share Certificate No 0003 was issued in the name of M/s. Minerva Services Limited. Subsequently, on 09.6.2014, two Ordinary Shares bearing Certificate No 4 was issued in the name of M/s. Trustee Service Corporation. Since 2014, the beneficial owner of companies is purportedly/allegedly Maryam Safdar.
After the confession of Maryam Safdar in Supreme Court, FBR officials did not take any action under section 122(5) read with section 214A of the Income Tax Ordinance, 2001, which read as under:
"122(5) An assessment order in respect of a tax year, or an assessment year, shall only be amended under sub-section (1) and an amended assessment for that year shall only be further amended under sub-section (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that-
(i) any income chargeable to tax has escaped assessment; or
(ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or
(iii) any amount under a head of income has been mis-classified".
"214A Condonation of time limit.- Where any time or period has been specified under any of the provisions of the Ordinance or rules made there-under within which any application is to be made or any act or thing is to be done, the Board may, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate.
Explanation,- For the purpose of this section, the expression "any act or thing is to be done" includes any act or thing to be done by the taxpayer or by the authorities specified in section 207.
Provided that the Board may, by notification in the official Gazette, and subject to such limitations or conditions as may be specified therein, empower any Commissioner or Chief Commissioner under this Ordinance to exercise the powers under this section in any case or class of cases".
For tax year 2014 onwards, her cases can be reopened even without using special provision of section 214A of the Income Tax Ordinance, 2001. If no action is taken by concerned officials of FBR yet, it must be taken as early as possible as the Implementation Bench of Supreme Court after report of JIT would take a strict view of the matter. The present Chairman FBR, who has been given extension till close of this financial year, is surely aware of the consequences of any inaction on this account as the Chairman NAB is already facing reference under Article 209 of the Constitution for his lapses.
Those who are saying that offspring of Prime Minister and his abettors, who admitted to have opened fake accounts in Hudabiya Paper Mills and elsewhere, have been exonerated must read the following parts of the judgement of majority view:
Per Justice Ejaz Afzal Khan:
"16.........Another document showing respondent No 6 as the beneficial owner of the flats is the alleged correspondence between Mr. Errol George, Director FIA, British Virgin Islands and Money Laundering Reporting Officer of Mossack Fonseca & Co (B.V.I.) Limited. A photocopy of an extract from the clients' register of Director, Minerva Trust and Corporate Services Limited, according to the learned ASC for the petitioner, is yet another document proving respondent No 6 as the beneficial owner of the flats. In any case, the questions how did Gulf Steel Mill come into being; what led to its sale; where did go its sale proceeds; how did they reach Jeddah, Qatar and the U.K.; whether respondents No 6, 7 and 8 in view of their tender ages. had the means in the early nineties to purchase the flats; whether sudden appearance of letters of Hamad Bin Jassim Bin Jaber Al-Thani is a myth or a reality; how bearer shares crystallised into the flats; how did Hill Metal Establishment come into existence; where did the money for Flagship Investment Limited and where did its Working Capital Fund come from and where did the huge sums running into millions gifted by respondent No 7 to respondent No 1 drop in clamour for answers to be found by the investigation agency and then by the Accountability Court established under the National Accountability Bureau Ordinance."
Per Justice Sh. Azmat Saeed:
"94. If the conclusions of the investigation by the Joint Investigation Team (JIT), so justify, appropriate orders may be passed for initiation of criminal proceedings under Section 9(a)(v) of the NAB Ordinance against the private Respondents, some of them or any other person, as the case may be".
Tax system is one of the fundamental elements of constitutional democracy. If elected members do not discharge their tax obligations diligently, not only the entire system gets discredited, they also lose the moral right to represent the people. No taxation without representation is a cardinal principle of democracy-Article 77 of our Constitution says that no tax shall be levied for the purposes of the Federation except by or under the authority of the Act of Parliament. In its recent judgement reported as (2016) 114 Tax 241 (Supreme Court Pak.), Supreme Court has held that "neither a Secretary, nor a Minister and nor the Prime Minister are the Federal Government and the exercise, or purported exercise, of a statutory power exercisable by the Federal Government by any of them, especially, in relation to fiscal matters, is constitutionally invalid and a nullity in the eyes of the law. Similarly budgetary expenditure or discretionary governmental expenditure can only be authorised by the Federal Government ie the Cabinet, and not the Prime Minister on his own".
Those in power must study (2016) 114 Tax 241 (Supreme Court Pak.) again and again as they are still violating the dictum of Supreme Court by levying and varying tax rates through Statutory Regulatory Orders (SROs). The latest example is SRO 292(I)/2017 dated April 30, 2017 through which against standard rate of 17% General Sales Tax High Speed Diesel Oil was subjected to rate of 33.5%.
Those who are in parliaments or aspire to contest the next elections must read the following case: In Muhammad Ahmad Chatta v Iftikhar Ahmad Cheema and others [2016 SCMR 763], the Supreme Court, while hearing an appeal under section 67(3) of the Representation of the People Act, 1976, disqualified the elected member for non- disclosure of assets of spouse holding as under:
From the perusal of record, it is established that while submitting the nomination papers, the respondent has not submitted statement regarding assets of his spouse as required under section 12 of the Act, 1976. The learned Election Tribunal, without taking into consideration this aspect of the case and while holding that respondent has not disclosed assets owned by his spouse and the account maintained by him, dismissed the election petition merely on the ground that mens rea is not proved and further the government exchequer has not suffered any loss on account of non-disclosure of these material facts. This finding of the Tribunal is against the spirit of law and as such calls for interference.
On May 5, 2017, the Supreme Court of Pakistan constituted a six-member JIT as ordained in its verdict of April 20, 2017 in Panama case. The members of the JIT are: Brigadier Nauman Saeed from the Inter-Services Intelligence (ISI), Brigadier Kamran Khurshid from the Military Intelligence (MI), Aamer Aziz from the State Bank of Pakistan (SBP), Bilal Rasool from the Securities and Exchange Commission of Pakistan (SECP), Irfan Naeem Mangi from the National Accountability Bureau (NAB) and Wajid Zia from the Federal Investigation Agency (FIA).
The JIT shall have all the powers given by the law relating to investigation including those available in the Code of Criminal Procedure, 1898, National Accountability Bureau Ordinance, 1999, and Federal Investigation Agency Act, 1975, etc. In 2011, the Supreme Court of India in a case of probe of white collar crimes and stashing of black money abroad also constituted a JIT in Ram Jethmalani & Others v Union of Indian & Others 2011 PTR 1933 (S.C. Ind)=(2011) 8 SCC 1 that included a senior officer of RAW. The critics in Pakistan objecting the inclusion of personnel from ISI & MI should read the said verdict delivered by the apex court of the largest democracy of the world.
In its order of May 5, 2017, the Supreme Court of Pakistan has observed that as the JIT, in essence and substance, is acting on the direction of the Supreme Court, all executive authorities throughout Pakistan shall act in aid of the JIT. It has also made it clear that if and when any person fails or refuses to associate with or appear before the JIT or refuses to cooperate or provide oral or documentary information required by it, the same be immediately brought to the notice of the court for taking appropriate action. The entire record of offshore companies belonging to First Family can easily be obtained by the JIT by seeking the assistance of International Union for Counteraction of Criminality-www.iucc.eu.
If before JIT, FBR takes a plea that old tax record of late Mian Muhammad Sharif is not available and therefore it could not verify assets and incomes earned in Qatar, the same can be obtained from Lahore High Court in the case of Mian Muhammad Sharif v Income Tax Appellate Tribunal Lahore (2015) 112 Tax 341 (H.C. Lahore). This record in High Court reveals that Mian Muhammad Sharif never declared any investment in Qatar or disclosed any income earned from there as claimed in two Qatari letters. The evidence relating to money laundering in Hudabiya Papers Mills Ltd and Hudabiya Engineering Ltd is also available in cases reported as PLD 2016 Lahore 667, 1995 P Cr. L J 1224.
The job of the JIT will be further made easy by the comprehensive FIA's report, prepared under the supervision of Rehman Malik, presented in the Supreme Court, during the hearing of Panama case. It contains all documents of illegal transfer of funds and use of fake accounts for money laundering.
The cases in Supreme Court against Nawaz Sharif, his family and PTI leaders (Imran Khan & Jahangir Tareen) regarding concealment of assets/liabilities and tax avoidance/non-compliance have a silver lining. These can help the nation purge politics tax evaders, beneficiaries of loan write-offs and plunderers of national wealth-no matter which political party they belong to. This issue was highlighted by Supreme Court in Rai Hassan Nawaz v Haji Muhammad Ayub & others 2017 PLD 70 SC stressing that:
"An honest and truthful declaration of assets and liabilities by a returned candidate in his nomination papers furnishes a benchmark for reviewing his integrity and probity in the discharge of his duties and functions as an elected legislator. His statement of assets and liabilities along with other financial disclosures contemplated by Section 12(2) of the Representation of people Act, 1976 [ROPA] provide the Election Commission of Pakistan and the general public with a picture of both his wealth and income. Such disclosures are crucial for demonstrating the legitimacy and bona fides of the accrual and the accumulation of economic resources by such a candidate. In other words, the said disclosures show the returns received from his economic activities and can indicate if these activities may be tainted with illegality, corruption or misuse of office and authority. This important aspect of the financial disclosures by a contesting candidate has been noticed by this Court in Muhammad Yousaf Kaselia vs Peer Ghulam (PLD 2016 SC 689)".
In 2017 PLD 70 SC, it is aptly observed by the Apex Court that:
"Where assets, liabilities, earnings and income of an elected or contesting candidate are camouflaged or concealed by resort to different legal devices including benami, trustee, nominee, etc arrangements for constituting holders of title, it would be appropriate for a learned Election Tribunal to probe whether the beneficial interest in such assets or income resides in the elected or contesting candidate in order to ascertain if his false or incorrect statement of declaration under Section 12(2) of the ROPA is intentional or otherwise."
It is a universally accepted principle that democracy and rule of law go hand in hand and without transparency and accountability both remain mere clichés. It is a constitutional obligation for persons aspiring for membership of parliaments to be honest and sagacious. If for contesting elections and thereafter as elected members they commit any lapse in respect of declarations of their assets/liabilities/tax obligations, exemplary punishment should be awarded-they being custodians of public trust.
(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences)