Overcoming defeatism

The main malady faced by our nation, especially the rulers, is defeatism. Everyone says our system is now deteriorated to the extent that it cannot be restored. People, hooked on easy money, have accepted corruption as a way of life. “We all are now incorrigible,” is the untoward consensus. So, the conclusion is “let things continue as they are”. This is the worst one can think of. Under these circumstances when anyone talks of reforms or improving things, people start showing pessimism as they are completely disillusioned because of confusion all around and incoherent conduct of all leaders. The recent suo motu actions of Supreme Court of Pakistan under Article 184(3) of the Constitution involving fundamental rights of the people have irked those who fear that their vested interests are under threat. The vested interests and forces of exploitation obviously want to preserve and protect the existing state of affairs that suits them for the purpose of loot and plunder.

On February 15, 2018, Federal Board of Revenue (FBR) submitted a report before the Supreme Court of Pakistan that took suo motu action on February 1, 2018 in the matter of untaxed/undeclared assets stashed abroad by Pakistanis. The perpetual inaction on the part of state institutions, mainly Parliament to remove protective laws, in the wake of Panama, Bahamas and Paradise Papers ultimately compelled the highest court of the country to take cognizance of the matter. As expected, FBR and other institutions showed “helplessness” in retrieving stolen assets and evaded taxes as existing laws are the main impediment in their way. All this was explained in great detail before the hearing on February 15, 2018 in an article, ‘Suo motu on foreign assets’, Business Recorder, February 9, 2018.

It is now for the Supreme Court to look at the laws that protect the rich and mighty, tax evaders and plunderers of the national wealth to freely take money out of Pakistan. Those who are pleading for supremacy of Parliament these days by discussing the conduct of judges violating Article 68 of the Constitution have been enacting and defending laws like Protection of Economic Reforms Act, 1992, Foreign Currency (Protection) Ordinance, 2001 and section 111(4) of the Income Tax Ordinance, 2001 to give a free hand to tax evaders and even criminals to not only resort to illegal outflows but to also decriminalise their tainted money. Now the Parliament is posing as champion custodian of people’s rights whereas it has all along been serving the interests of only the rich and mighty. By just laying all the blame on FBR, State Bank of Pakistan, Federal Investigation Agency or other agencies for inaction, is like making them the scapegoats. The fact is that laws are still in existence under which no action can be taken against those who remitted funds abroad through foreign currency accounts. Unless the laws are repealed, even no amnesty will succeed to recoup tax losses.

In ‘Amnestomania’, Business Recorder, January 5, 2018, it was highlighted that addiction on easy money (it includes speed money, rent seeking, tax evasion, proceeds of crime and fraud etc), is a peculiar Pakistani disease. The crooked segments of society that rule or finance the rulers support and promote amnesties and immunities in the name of “good economic measures” or “necessary evils” or “unavoidable actions” or “compulsions” etc. These are nothing but pretexts. They violate the laws with impunity and then plead for tax amnesties, immunities and concessions even in the presence of permanent amnesty for whitening untaxed and/or criminal proceeds in the form of section 111(4) of the Income Tax Ordinance, 2001, section 5 of Protection of Economic Reforms Act, 1992 and Foreign Currency Account (Protection) Ordinance, 2001.

The question is that why tax evaders and plunderers of national wealth need specific tax amnesties and that too on periodic basis. In the wake of the Panama, Bahamas and Paradise Papers, certain Pakistanis (not all) who have been stashing assets abroad are showing keen interest in an amnesty scheme to whiten the same. The Prime Minister, his Adviser on Finance, Revenue and Economic Affairs and others have given good news to people that “another amnesty is coming soon”. But bad news for those who have assets abroad is that Chairman National Accountability Bureau (NAB) has already ordered investigation for their offshore companies and assets.

It is strange that policymakers and legislators are not sure what to do: give amnesty or penalise holders of tainted money? A set of law protects tax evasion and even money laundering and another one provides for rigorous punishment with fine and confiscation of property. This is the real dilemma of governance-enacting of conflicting, rather contradictory laws and keeping the people under fear while simultaneously luring them to indulge in unlawful practices.

We do not try to learn from others who, without resorting to amnesties recovered evaded taxes. Our policymakers are giving examples of Indonesia and India whereas both failed to recoup the actual quantum of tax evaded. They have no idea about United States Department of Justice (DoJ) Swiss Bank Programme under which by January 2016, in “Category 2” [referring to those banks-either Swiss or foreign institutions with a Swiss office-that held accounts belonging to US tax cheats] $1.36 billion from 80 Swiss banks were recovered. Under this programme, USA also secured $8 billion in backdated taxes and fines from Swiss bank clients and had enough documentary evidence to pursue lawyers and other facilitators. Had we started a similar programme in 2014 when tax treaty was being renegotiated with Switzerland, we could have succeeded in recovering a substantial amount by this time. In fact, Ishaq Dar intentionally sabotaged it-see details in ‘Pakistani cash in Swiss banks pulled out’, The Express Tribune, February 22, 2017].

In ‘Allying with tax evaders’, Business Recorder, January 25, 2103, it was mentioned that “while our government and parliamentarians during the last many years have been busy in extending amnesty schemes, immunities and concessions to tax evaders to decriminalize their illegally-gotten wealth and avoid all kinds of probes and punishments under various laws, the global governments showed commitment to take tax cheats to task. The latest move came from Hungary’s government on 16 January 2013 when Prime Minister’s chief of staff Janos Lazar expressed determination to identify and tax all wealth held by Hungarians in foreign-mostly Swiss-banks. Lazar announced that Hungary wants to tax all holdings in foreign deposits at an average 35 percent rate.

Determination of the Hungarian government to crack down on tax evaders and impose tax on the rich paid off to the utter surprise of many financial wizards and political pundits. Hungary paid back the final installment of $2.125 billion of a total credit line of $25.5 billion before even it was due to the International Monetary Fund (IMF). Hungary obtained loan in 2008 under a previous Socialist-led government to stave off financial collapse during he worldwide economic crisis. The government of Viktor Orbán after coming to power in 2010 showed determination to quit IMF programme declaring that the terms of the IMF loan were not in “Hungary’s interest”. Within three years, Orbán achieved what he promised, while our present rulers since 2013, on assuming powers, are shamelessly offering more and more tax amnesties.

It must be mentioned that Central Europe’s most indebted nation, Hungary, was pulled back from the brink of bankruptcy with a 20 billion Euro rescue package from the IMF and the European Union amid the global crisis. Shortly after taking office in 2010, the then Prime Minister, Orbán, abruptly ended that programme as the government sought to control the country’s financial affairs on its own. It initiated an unorthodox campaign that included Europe’s highest bank tax and special levies on business.

In Pakistan, PML-N during election campaign claimed that it would not go to the IMF and would raise its own funds, but immediately on assuming power not only had it sought IMF’s huge loan but also gave amnesties to the rich and mighty. It cruelly imposed extra tax burden on the poor and vulnerable economic classes-especially the fixed income groups. Ousted Premier Nawaz Sharif and his close relative Ishaq Dar, now absconding to avoid trial before Accountability Court, bowed before the IMF rather than showing fortitude demonstrated by the Hungarians under Victor Orbán.

The government of PPP (2008-13) also displayed the same conduct-instead of taxing the rich and stop giving plots and perquisites to the privileged classes, it tabled a bill offering unprecedented tax amnesty at a meagre rate of 1%! Luckily, the Bill was not passed because of media’s immense pressure campaign that elected members did not pay taxes and just wanted to secure such benefits for themselves. The PPP government also did not bother to seek information from Swiss banks where Pakistanis parked untaxed funds of over Rs 1.52 trillion [‘No will to tax the rich’, Business Recorder, June 14, 2013]. The same attitude was shown by the government of PML from 2013 till today.

The Hungarian government forced Switzerland to disclose all data pertaining to bank accounts of Hungarian citizens in Swiss banks. In 2010 Hungary was struggling to reduce its budget deficit under the European Union limit of 3 percent of gross domestic product (GDP). To meet the challenge, Premier Orbán took a hard line to offshore holdings. But our rulers have been encouraging flight of capital and extending unprecedented tax concessions to the militro-judicial-civil complex in the form of free plots and perquisites, and squandering taxpayers’ money for their personal comforts and luxuries [‘An elitist Pakistan’, Business Recorder, July 26, 2013].

All governments including the present one have shown total apathy towards improving tax collection and eliminating wasteful expenses resulting in fiscal deficit-it would reach over Rs 2 trillion this year. This is the difference between Hungary and Pakistan. In trouble, Hungarian leadership showed vision and courage to overcome the crisis whereas our leaders remain busy in evading taxes and plundering the wealth of the nation and giving others incentives to do so as well.

The Hungarian government citing international comparisons and intelligence sources estimated the total holding of Hungarians in foreign, mostly Swiss banks to at least one trillion forints (USD 4.53 billion) and passed asset seizure legislation for tax recoupment. They adopted pro-growth policy and reduced interest rates and inflation. Our governments have never shown any interest in accelerating growth and taxing/confiscating assets stashed abroad-no information from the countries having tax treaties with Pakistan was ever utilised. This is not a case of apathy or bad governance, but a wilfull criminal act-instead of taking action against rent-seekers and unlawful outflows, the successive governments, civilian and military alike, have decided to continue with obnoxious provisions like section 5 of Protection of Economic Reforms Act, 1992, Foreign Currency Account (Protection) Ordinance, 2001 and section 111(4) of the Income Tax Ordinance, 2001 providing a legal cover to tax evaders and persons engaged in organised crimes to get their dirty money laundered. The million dollar question is that how can such inept and ant-people regimes ever pull the country out of this present fiscal quagmire, especially when Parliament is also nothing but a rubber stamp and recently was very keen to enact law to allow a disqualified person to head a political party rather than banning such elements to even take part in politics?