Road to accountability

There is a national consensus that corruption is the foremost factor hindering our socio-economic progress and the accompanying repercussions that negatively affect all spheres of the national life. But no tangible steps or anti-corruption mechanism has been developed by any government to curb this permeating cancer.

Dictators – who have justified their coups as attempts to curb rampant corruption and hold guilty politicians accountable for filching national wealth – have further aggravated the problem by indulging in corrupt practices to ensure the longevity of their tenure. As a result, few would differ with the view that our politicians and military dictators were equally responsible for the existing state of affairs. Most of them have parked their stolen money in overseas tax havens, mostly in Swiss banks.

The reason why nothing could be done to unmask the plunderers of national wealth was that Pakistan was neither part of any international arrangement for the exchange of necessary information in this regard nor did it have any bilateral agreement with the concerned countries to reveal the names and the amount of wealth that was kept in their banks.

However, it is heartening to note that the PML-N government has taken significant initiatives in this regard and the nation will soon know who has been looting national wealth with impunity. It is astonishing to note that the steps being taken by the government have gone unnoticed and even the media – which has been in the forefront of highlighting corruption – has not accorded importance to these steps.

The first step involved the decision to sign the Convention of Mutual Administrative Assistance in Tax Matters – which was developed by the Organisation for Economic Cooperation and Development (OECD) – on September 14, 2016. The convention is an instrument for international tax cooperation that provides for all forms of administrative assistance in tax matters, the exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection.

By signing this convention, Pakistan has exhibited its commitment to combating offshore tax evasion and tax avoidance. A noteworthy aspect of this development is that the PML-N government had taken initiatives in this regard much before the Panama leaks issue surfaced. The federal cabinet had authorised the finance minister to initiate efforts to sign the convention on August 31, 2013. In order to meet the OECD requirements, Pakistan made several amendments in its domestic income tax laws during the last two years and, upon fulfilling these conditions, signed the accord in September 2016. The agreement is likely to be implemented by the end of 2017 and become fully operational from 2018.

The convention obligates the signatories to extend all possible forms of administrative cooperation to each other in assessing and collecting taxes with a view to combat tax avoidance and evasion. According to the convention, any member country can ask for information from another member country concerning a particular person or transactions which can be help administer or enforce tax laws in the requesting country. The member countries can also forward information without prior request to each other on a reciprocal basis about which there is a knowledge that there may be a loss of tax in the other country or would give rise to an increase in tax liability in that country.

The convention also provides for the automatic exchange of information that is relevant to administer or enforce their tax laws. After the convention was signed, the obstacles involved in obtaining information about untaxed money stashed in foreign banks – including the money invested in offshore companies – that belongs to Pakistanis have been removed.

Another successful move made by the government to obtain information regarding money stashed in foreign banks by our political and military leaders, is the agreement reached between Pakistan and the Swiss government to sign an accord on March 21. This accord will pave the way for the exchange of information regarding the details of the bank accounts of Pakistani nationals in the Swiss banks. The process of negotiations with the Swiss government – as revealed by the finance minister on the floor of the National Assembly – also started in 2013 which sought to revisit the previous treaty of 2005 on the minimum exchange of information.

The Swiss authorities were initially adamant and put forth strict conditions for the proposed agreement – including a cut in the tax rates, the ‘Most Favoured Nation’ status and the reduction in limits for student accounts. Although Pakistan declined to accept these conditions, it kept persuading the Swiss authorities to sign the new agreement. Meanwhile, Pakistan also made a sagacious move to be part of the OECD Convention. The signing of the convention also cleared the ground for the automatic exchange of information regarding the money hidden in the Swiss banks. The Swiss authorities therefore had no choice other than to agree to the new arrangement without the proposed conditions.

The foregoing developments will undoubtedly have far-reaching implications. They will not only expose those who have been looting the national wealth and parking it in foreign banks and evading taxes in the past but will also choke the avenues of channelling pilfered wealth to the offshore companies or foreign banks. These moves will also strengthen the credentials of the present government as an honest and committed entity with regard to eliminating corruption among politicians and people in authority who have been taking the national exchequer for a ride in the past. It would also deter would-be culprits from indulging in illegal and detestable practices.

The record of the government on the internal front with regard to curbing corruption is also quite appreciable. Transparency International, in its three consecutive annual reports, has indicated a nosedive in corruption in Pakistan. The government has also moved a bill in parliament called Pakistan Commissions of Inquiry Bill, 2016 in light of the observations of the SC when the government had requested the CJ to form a judicial commission to probe the Panama leaks. The government-sponsored bill adopted by the National Assembly has also been unanimously passed by the Senate – though with some amendments proposed by the opposition.

The bill will now go back to the National Assembly and become a law that will replace the Commission of Inquiry Act, 1956. The new law seeks to constitute a powerful commission to investigate various issues. It has a wider scope and will have all the authority to constitute special teams of experts as well as international teams to obtain the required information. Once the amended bill is passed by the National Assembly, it will surely mark the beginning of a new phase of the much-required accountability.

The writer is a freelance
contributor.

Email: ashpak10@gmail.com