Illicit financial activities enabled by tax havens undermined the fight against poverty. When taxes are evaded, when state assets are taken and put into these havens, all of these things can have a tremendous negative effect on our mission to end poverty and boost prosperity—Jim Yong Kim, President World Bank
The Federal Finance Minister, in his written reply to a question in the National Assembly, has claimed: “offshore companies are legal and could be financially beneficial within the legal framework, but they could also be used for illicit purposes”. Federal Board of Revenue (FBR), as per Finance Minister, is obtaining documentary evidence regarding investment made in offshore companies and revenue generated through these companies by Pakistani residents. He says, “the results obtained will then be analysed and compared with FBR’s database and with the taxpayers’ record. No action will be taken if the data matches the information regarding the assets provided to the FBR”.
The punch-line of Mr. Dar’s statement is: Offspring of Prime Minister established offshore companies legally and not for illicit purposes and since sons are non-resident for the purpose of tax laws of Pakistan no action is warranted. As regards, Maryam Nawaz, she is just a trustee having no financial interest/investment in offshore companies; hence, matter ends in no action! This is the conclusion, even before investigations.
In TV talk-shows, the team comprising more loyal than King, keep on emphasising “the name of Prime Minister in not in Panama Papers”. They claim that on the contrary, the names of two leading leaders/financiers of Pakistan Tehreek-e-Insaf are in there and Imran Khan hasconfessed to establish an offshore company to avoid taxes in United Kingdom—this fact he never disclosed in papers filed with Election Commission of Pakistan (ECP) and returns with FBR.
Presently, petitions are pending before the Speaker National Assembly and Election Commission against some elected members, including the Premier Nawaz Sharif. This is a good omen for cleansing in our politics of tax cheats. Let the law take its course and anybody guilty of money laundering, tax evasion and/or cheating should be disqualified after due process of law. Nobody should be a sacred cow—in politics, judiciary or civil-military hierarchy.
In response to a question of PPP MNA, Dr. Nafisa Shah, the government has revealed that FBR has identified 440 Pakistani residents linked with different offshore companies and action is being taken under the law. Security and Exchange Commission of Pakistan (SECP) has also initiated investigation into the offshore companies to find out whether any direct investment was made by entities registered in Pakistan in such companies.
It is worth mentioning that no action can be taken under the Income Tax Ordinance, 2001 [section 122 read with section 111] against a person who has been filing returns “after the expiry of five years from the end of the financial year” in which the Commissioner passed the order. As regards a person who has not filed return for any of the last five tax years, notice for filing of return under section 114(4) can be issued in respect of one or more of the last ten completed tax years.
The very interesting and intriguing part of statement filed by Finance Minister in National Assemblyis: “if the person provides complete documentary evidence that he is non-resident for tax purposes, no further action can be taken under the income tax laws”. This is where the catch lies. Sons of Prime Minister are non-residents for tax purpose and according to Finance Minister no action can be taken against them! The real point missed by him is that Prime Minister has been investor/beneficiary of the properties/businesses abroad—these are held benamiin the names of offspring who never had independent sources for these assets/businesses. The action can be taken against Prime Minister under section 108 and 109 of the Income Tax Ordinance, 2001 for tax avoidance and colourful transactions.
There is no disclosure by Prime Minister of any asset abroad, though in his nomination papers, filed with ECP in 2013, he showed Maryam as dependent! It is admitted fact (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 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 as dependent!
The late father of Prime Minister, Mian Muhammad Sharif, was owner of one flat in Mayfair, London, 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 shown in his assets by Prime Minister as inherited, but property was not!This is a clear case of omission and non-disclosure of assets—not requiring probe vis-à-vis Panama Papers.
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 a few days of filing the nomination papers. Why was this lapse/default ignored both by FBR and ECP?
Nobody has so far raised the point as to why Prime Minister Nawaz Sharif did not declare assets/liabilities of her daughter Maryam though she was shown as dependent in declarations filed before Election Commission in 2013.
Nawaz Sharif gave gift of Rs. 31,700,000 to her daughter on 31-06-2011but did not show the same in assets when she was dependent! Maryam became the sole shareholder of Nescoll in 2006 and 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, Nawaz Sharif in 2013 violated section 12(2)(c)&(d) of Representation of People Act, 1976.
In Pakistan there is complete apathy about tax evasion and illegal flight of capital. The reason is simple that keymembers in all political parties, including their top men, singlehandedly running the show, have poor tax records. There is no will tohave a purge withintheparties. The non-democratic and authoritarian model within political parties and control by people having money power is the real challenge. Nobody wants to discuss this aspect. The debate over Panama Papers or corruption is nothing but political game aimed at mudslinging. There is no desire or will for across the board accountability.
Dr Ikramul Haq, Advocate Supreme Court and author of many books, is Adjunct Faculty at Lahore University of Management Sciences (LUMS)
