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Retrieving untaxed/ill-gotten assets — I

In the Supreme Court of Pakistan, Suo Motu Case No. 2 of 2018 re ‘Maintaining of Foreign Accounts by Pakistani Citizens Without Disclosing the Same/Paying Taxes’, is still pending for adjudication. It started on February 1, 2018 and after many hearings, formation of committees and seeking assistance from a number of leading lawyers and experts in fiscal, business and finance, remains unconcluded till today. The last hearing in this case was held on January 14, 2019 as per the website of Supreme Court of Pakistan.

The purpose of suo motu case [see order dated June 12, 2018 reported as PLD 2018 Supreme Court 686] was retrieving looted wealth and untaxed assets stashed abroad, exposing and punishing the culprits. On the contrary, the culprits were offered unprecedented immunities and amnesties and assured complete confidentiality through unconstitutional laws, first by the government of Pakistan Muslims League (Nawaz)—[PMLN] and then by the coalition Government of Pakistan Tehreek-i-Insaf (PTI). Though these laws were ultra vires of the Constitution of the Islamic Republic of Pakistan, 1973 [“the Constitution”] on many grounds and were promulgated during the pendency of Suo Motu Case No. 2 of 2018 and Constitution Petition No.72 of 2011, filed by Muhammad Ali Durrani, ex-Minister and former Senator, attached with it, involving many common issues, no action is taken till today.

The apex court in suo motu case No. 2 of 2018 noted: “It has been common knowledge for years that a large number of Pakistani citizens, who are residents of Pakistan and are maintaining accounts in foreign countries without disclosing the same to the authorities competent under the laws of Pakistan or paying taxes on the same in accordance with law. Prima facie, it appears that such money is siphoned off without the payment of taxes through illegal channels and represents either ill-gotten gains or kickbacks from public contracts. Such money creates gross disproportion, inequality and disparity in society, which warps economic activity and growth, and constitutes plunder and theft of national wealth”.

The policy of appeasement towards corrupt practice, looting and plundering of national wealth, spread over the last many decades, has culminated in the syndrome of defeatism that “nothing can be done”, hence amnesties! In other words, defeatism as mindset has developed as nation syndrome—where the beneficiaries of tainted money successfully shift the entire blame on weaker administration and existing laws. The question arises that when there are glaring inactions why corrective and remedial measures have not been taken? For example in the case of Nawaz Sharif and Asif Ali Zardari, and many others, the much-needed action of freezing assets under section 12 of the National Accountability Ordinance, 1999 (NAB Ordinance) is not taken.

The nation wants looted wealth back, not just putting the looters behind bars and later allowed to be released on bail or even go abroad for medical treatment. Nothing has been done on the front of retrieving untaxed and/or looted wealth for which Suo Motu Case No. 2 of 2018 was initiated more than two years ago. In cases of financial crimes, the real issue is retrieval of looted money and tax on untaxed assets. This has not been done even in a case despite the Supreme Court asked for action against the Attorney General in 2010 for withdrawal of Pakistan’s claim of US$ 60 million in para 177 to 179 of the case reported as Dr Mobashir Hassan and other v FOP and others PLD 2010 SC 265. Tragically, even after even after 19 years the order remains unimplemented.

In the changed world scenario, many countries are exchanging information and taking stringent measures against tax evasion, plundering of national wealth, looting public funds, corruption, money laundering, terrorist financing. Unfortunately, however, even after establishing Special Asset Recovery Unit (ARU) by Prime Minister, working since October 2018, no amount is repatriated till today. On the contrary, asset whitening schemes were offered causing loss of billions to the national exchequer. It may be recalled that while addressing a Press conference on October 4, 2018, Special Assistant to Prime Minister on Accountability, claimed that details of more than 10,000 properties owned by Pakistanis were traced in Dubai and England and declared it “a huge success”. He said: “We have formed a task force which will ensure the money sent abroad is brought back”. He said that assets detected could be divided into two categories; belonging to public officeholders and common citizens. Special Assistant to Prime Minister on Accountability has now added responsibility of Interior Ministry, in addition to Chief of ARU that works directly under Prime Minister of Pakistan.

It is high time that we should take concrete measures for recovering looted wealth of the nation rather than lamenting over our past mistakes. While many countries have regularized the past through bilateral agreements, multilateral initiatives and seeking help of specialized agencies, we are still debating on how to further succumb to those who have consistently violated laws of the land, created assets beyond their own means and have always escaped punishment taking refuge under anti-people laws and/or frequent amnesties.

Quite shockingly, during the pendency of Suo Moto Case No. 2 of 2018, two laws—the Foreign Assets (Declaration and Repatriation) Ordinance, 2018 and the Voluntary Declaration of Domestic Assets Ordinance, 2018—were promulgated through Presidential Ordinances on April 8, 2018 and later passed by the National Assembly as Money Bill in Finance Act, 2018. The government of Pakistan Muslim League (Nawaz)—PMLN—got the Foreign Assets (Declaration and Repatriation) Act, 2018 and the Voluntary Declaration of Domestic Assets Act, 2018 passed as part of the Finance Act, 2018. All these laws, assuring complete confidentiality to tax evaders and plunderers of national wealth, could not be passed as Money Bill but was blatantly done so by the National Assembly in utter violation of the Constitution and judgements of the Supreme Court, namely, Workers Welfare Funds m/o Human Resources Development, Islamabad through Secretary and others v East Pakistan Chrome Tannery (Pvt.) Ltd through its GM (Finance), Lahore etc. and others [(2016) 114 TAX 385 (S.C. Pak.)], Mir Muhammad Idris v FOP PLD 2011 SC 213 and Sindh High Court Bar v FOP PLD 2009 SC 789. Tragically, our civil society also did not bother to challenge these under Article 199 of the Constitution on the basis of above cases and/or invoking Article 189 of the Constitution. Both these schemes fetched 82,889 declarations and tax amount of Rs. 124 billion (domestic Rs. 77 billion and foreign Rs. 47 billion), though the then Adviser to Prime Minister on Revenue, Haroon Akhtar, claimed that collection would not be less than US$ 5 billion for foreign assets alone.

No political party representing Opposition in Parliament even mentioned it being unconstitutional in the light of and in clear violation of the judgement of Supreme Court [(2016) 114 TAX 385 (S.C. Pak.)] which says:

“We may develop this point further; although Article 73(3)(a) of the Constitution states that a Bill shall not be a Money Bill if it provides for the imposition or alteration of a fee or charge for any service rendered, this does not mean that if a particular levy/contribution does not fall within Article 73(2) it must necessarily fall within Article 73(3). Sub-articles (2) and (3) are not mutually exclusive. There may very well be certain levies/contributions that do not fall within the purview of Article 73(3) but still do not qualify the test of Article 73(2) and therefore cannot be introduced by way of a Money Bill, and instead have to follow the regular legislative procedure. The discussion above that the subject contributions/payments do not constitute a tax is sufficient to hold that any amendments to the provisions of the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 could not have been lawfully made through a Money Bill, i.e. the Finance Acts of 2006 and 2008, as the amendments did not fall within the purview of the provisions of Article 73(2) of the Constitution”.

The above judgement of the Supreme Court approved the brilliant discourse and conclusion on Money Bill by the illustrious Justice Mansoor Ali Shah (the then Chief Justice Lahore High Court and later elevated to Supreme Court) in 2011 PTD 2643 as under:

“The special legislative procedure is, therefore, an exception and must operate in its restricted scope. Being a special procedure it also has to be construed strictly as it is a deviation from the normal legislative process under the Constitution. Integrity of a money bill must be jealously guarded and matters falling outside the purview of Articles 73(2)(a) to (g) of the Constitution should not be permitted to stealthily crawl into a money bill (at times due to political sophistry of the Government in power) -and adulterate its sanctity”.

The coalition government of Pakistan Tehreek-i-Insaf (PTI) also followed its predecessor PMLN and announced asset/income/expenditure whitening scheme—the Assets Declaration Ordinance, 2019 through a Presidential Ordinance on May 14, 2019, which was later made part of the Finance Act, 2019 as Money Bill again in violation of Constitution and binding judgement of Supreme Court under Article 189 of the Constitution as explained above. The scheme gave generous incentives to those who had not been paying their taxes honestly, concealing and/or understating assets/incomes/sales/expenses and cheating the State.

In the Foreign Assets (Declaration and Repatriation) Ordinance, 2018, benefit of whitening undeclared assets situated outside Pakistan was extended to all citizens of Pakistan, including those holding public office prior to 1st day of January 2000 which was in utter violation of dictum laid down by Supreme Court in the case of Dr. Mobashir Hassan and other v FOP and others PLD 2010 SC 265. The same was the case with assets inside Pakistan covered under Voluntary Declaration of Domestic Assets Ordinance, 2018 and Assets Declaration Ordinance, 2019 promulgated by PTI Government, made an Act of Parliament through Finance Act 2019 and received the assent of the President on June 30, 2019.

The gross violation of the Constitution, supreme law of the land, was committed by allowing persons holding public office holders prior to January 1, 2000 to avail the asset whitening schemes. It amounts to sanctifying assets created out of corrupt practices by public officeholders.

Section 13 of Foreign Assets (Declaration and Repatriation) Ordinance, 2018 says: Notwithstanding the provisions of sub-section (3) of section 216 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Right of Access to Information Act, 2017 (XXXIV of 2017) and any other law for the time being in force, particulars of any person making a declaration under this Ordinance or any information received in any declaration made under this Ordinance shall be confidential. Similar confidentiality was extended by the PTI Government in Assets Declaration Ordinance, 2019.

The above quoted section 13 of the Foreign Assets (Declaration and Repatriation) Ordinance, 2018 was against Article 19A of the Constitution of Pakistan, which says: “Every citizen shall have the right to have access to information in all matters of public importance subject to regulation and reasonable restrictions imposed by law”. It also violated the dictum laid down by Supreme Court in Watan Party & Others v Federation of Pakistan & Other [PLD 2012 SC 292] as under:

“Article 19A has thus, enabled every citizen to become independent of power centres which, heretofore, have been in the control of information on matters of public importance… Article 19A is a grant of the Constitution and, therefore, cannot be altered or abridged by a law enacted by Parliament…It, therefore, will not for this Court to deny to the citizens their guaranteed fundamental right under Article 19A by limiting or trivializing the scope of such right through an elitist construction whereby information remains the preserve of those who exercise state power.”

Section 13 of Foreign Assets (Declaration and Repatriation) Ordinance, 2018 also nullifies section 4(2) of Foreign Assets (Declaration and Repatriation) Ordinance, 2018 which says: The provisions of this Ordinance shall not apply to any proceeds or assets that are involved in or derived from the commission of a criminal offence.

In the presence of complete and absolute confidentiality, authorities investigating proceeds of crime and corruption became powerless, helpless and non-functional in punishing the offenders. The same position prevailed for Voluntary Declaration of Domestic Assets Ordinance, 2018 vide its section 11 and PTI’s Assets Declaration Ordinance, 2019.

Through Foreign Assets (Declaration and Repatriation) Ordinance, 2018, Voluntary Declaration of Domestic Assets Ordinance, 2018 and Assets Declaration Ordinance, 2019, political elite under the garb of democracy (sham) successfully protected the plunderers of national wealth and tax evaders and has now made the National Accountability Bureau (NAB) also toothless through National Accountability (Amendment) Ordinance, 2019.

The PTI government, instead of retrieving the huge financial losses caused to national exchequer, offered unprecedented concessions and immunities to ‘Thieves of State’ as was done by PMLN. By paying just peanuts they are now keeping the assets with them inside and outside Pakistan. Even the “whitened assets” located inside country were later transferred outside Pakistan as no amendment was made in the Protection of Economic Reforms Act, 1992 and Foreign Currency (Protection) Ordinance, 2001 to check unregulated outflows that are in billions of dollars every year.

The Governor State Bank of Pakistan may be directed by the Supreme Court in pending case [Suo Muto Case No. 2 of 2018] to give details of outflows since 1992 from Foreign Currency Accounts, exceeding US$30,000 by a single person/entity per year, other than those related to education and health expenses and for bona fide business after following the prescribed rules and seeking approval, as the case may be.

The National Accountability (Amendment) Ordinance, 2019 provides that the NAB can now only proceed in corruption cases of Rs 500 million and more. Additionally, its jurisdiction over matters relating to tax, bank loans, stock, etc., has been curtailed. The Federal Bureau of Investigation (FIA), Securities and Exchange Commission of Pakistan (FIA) and Federal Board of Revenue (FBR) are assigned the exclusive jurisdiction in all such matters. Even before the promulgation of National Accountability (Amendment) Ordinance, 2019, there was a statement by the Chairman of NAB on October 6, 2019 that none of Bureau’s officials would call any businessman directly for questioning unless the matter is referred to NAB by FBR or any other tax agency. It obviously made both the dishonest tax officials and unscrupulous tax advisers/taxpayers jubilant. Not only FBR but the officers of other departments where unholy alliance of law-keepers and law-breakers exist showed “satisfaction” that ultimately they had managed to convince the Prime Minister that NAB was the root cause of all troubles on economic front! This thinking/policy and National Accountability (Amendment) Ordinance, 2019 needs to be reviewed, especially after recent alleged mega tax fraud cases in FBR causing losses of billions to the national exchequer.

(To be continued)

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

Huzaima Bukhari and Dr Ikramul Haq, "Retrieving untaxed/ill-gotten assets — I," Business Recorder. 2020-02-21.
Keywords: Economics , Offshore bank accounts , Domestic assets ordinance , Paying taxes , Unconstitutional laws , Constitution Petition , Financial Crimes , Untaxed assets , Terrorist financing , Finance Act , Foreign assets , Money bill , Looted wealth , Whitening schemes , Muhammad Ali Durrani , PLD , PMLN , PTI , NAB , ARU , FIA , FBR