Patronising dirty money.
Policies of appeasement by successive governments have made Pakistan a victim of terrorism, tax evasion and corrupt practices.
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| Policies of appeasement from successive government. |
Pakistan is a unique country where the governments — military and civilian alike — have been frequently introducing amnesty and immunity schemes allowing whitening of dirty money. It means, the Legislature and Executive have been sponsoring and patronising criminal activities of not only tax evaders, but also extending facilities to terrorists, drug barons, and other criminals to decriminalise their funds.
In the presence of laws protecting dirty money, the judiciary cannot be blamed for not punishing anybody engaged in terrorism financing, corruption, money laundering, tax evasion etc. The question is why do elected members of Parliament approve and/or pass such undesirable laws/schemes?
For the last many decades, Pakistan is victim of terrorism, tax evasion, corrupt practices, reverse capital flows and capital flights, all due to policies of appeasement by successive governments.
Besides the bona fide investment in real estate in Pakistan, this sector has been the most attractive shelter for dirty money as well as generating further unprecedented untaxed profits. The recent amendments made in Income Tax Ordinance, 2001 (“the Ordinance”) regarding withholding tax on purchase and sale of immovable property as per rates notified by Federal Board of Revenue (FBR) and taxation of capital gain on disposal were not aimed at countering black money. On the contrary, these were aimed at protecting and promoting land/developer mafia and ensuring that majority of the Pakistanis could not even dream of having a decent living.
Now, the government is considering yet another amnesty for owners of dirty money by amending section 111(4) of the Ordinance giving them facility to pay 3 per cent of difference of valuation per FBR’s rate and that of local authorities and no question will be asked about untaxed money!
For the unscrupulous elements, doors for whitening money have been kept wide open as they can get their untaxed funds whitened through section 111(4) of the Ordinance, 2001 — see details in Prudent taxation, The News, July 17, 2016.
The new intended amendment in section 111 will give free hand to all the criminals to get their funds whitened by just paying three per cent of rate difference. This will be further relaxation in section 111(4) that says that no action can be taken in respect of “any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect”.
It is an undeniable fact that every year billions of dollars are sent abroad and then parts of this dirty money, hidden in tax havens, is legitimised using section 111(4) of the Ordinance.
It is an undeniable fact that every year billions of dollars are sent abroad and then parts of this dirty money, hidden in tax havens, is legitimised using section 111(4) of the Ordinance. Abusing this law, the tax evaders get undeclared money whitened by paying just an extra 1.5 per cent to 2 per cent to any money exchange dealer to get remittances fixed in their names. This is an unprecedented facility for tax dodgers and criminals to launder their untaxed money through state patronage!
Taking benefit of this immunity, even the sponsors of terrorists invest in real estate and then make huge profits for further nefarious activities. The government now intends to further strengthen their hands. FBR is already made toothless by this section and its authority will be further eroded through intended amendment in section 111(4) of the Ordinance.
Pakistan represents a classic case study of state-sponsored money-laundering. The economy of the country has lost billions of dollars to crime, corruption, and tax evasion since 1991 when many money-whitening schemes and Protection of Economic Reforms Act 1992 were introduced by the then government of Nawaz Sharif to legitimise his and others’ untaxed, undeclared money and assets — see details in books, Pakistan: From Hash to Heroin and Pakistan: Drug-trap to Debt-trap.
The Protection of Economic Reforms Act, 1992 gives a free hand to tax cheats and money-launderers to get billions whitened. Unfortunately, this law has never been examined by anybody from this perspective. All public office-holders who have taken advantage of this law to avoid tax should have been disqualified for open admission of cheating the state. But not a single case has been filed till today and Election Commission of Pakistan at its own has never taken cognisance of it. It confirms how the rulers in this country engineer laws for self-aggrandisement rendering as losers the poor and helpless of this Land of Pure, who are burdened with exorbitant indirect taxes and yet get nothing in return. The rich and mighty enjoy all luxuries of life at the expense of taxpayers whereas nearly 70 per cent population is living below the poverty line.
Corruption in Pakistan is all pervasive. The ruling elite — indomitable military-civil bureaucracy, corrupt politicians and unscrupulous businessmen — keep on singing the mantra of “patriotism” (sic) but indulge with impunity in rent-seeking, power politics, plundering of national wealth and organised crime. They consider it as their inherent right to deprive the poor of their fundamental rights. A lack of accountability and unprecedented tolerance towards corruption has made Pakistan a state controlled and run by ruthless forces representing money power. It is thus no wonder that democracy failed to take firm roots here even after seven decades of independence.
Democratisation of society is possible only through a credible system of accountability that works across the board with no sacred cows. If mighty segments of society — politicians, high-ranking state officials and judges — remain unaccountable, democratic dispensation, transparency and rule of law can never be established. The public has no access to tax declarations of public functionaries.
Unfortunately, Pakistan has become a place where rampant and institutionalised corruption has become a way of life. Money from whatever source it comes is the catchphrase in our society displacing what was termed ‘morality’ in the yester years.
For avoidance of tax, one just needs to go to a money exchange company and pay a small premium (much lower than tax payable) for remittance (sic) to one’s account. This is the easiest way of whitening untaxed and/or dirty money one can think of. Is there any other State in the world that gives such patronage to criminals and tax evaders?
In Pakistan, untaxed (legally whitened money) money is visible everywhere: in the ostentatious lifestyle of new urban development, in the bright galore of foreign cars on roads, in smugglers’ markets brimming with latest foreign electronic gadgetry and in the shops crammed with foreign goods. In democratic, civilised countries tax evasion is a crime that does not go unpunished. But in Pakistan it is rewarded by state through provisions like 111(4) of the Ordinance.
Tragically, with the free hand given to tax evaders and criminals by the state through legal provisions, Pakistan has become a free-for-all society. The general attitude is of helpless resignation, an acceptance of the defeatist principle that if one is to survive one must become part of the game. It then becomes dangerously akin to the rule of jungle — might is right, the weak are meant to fall out and the predators meant to prey freely. The bleak side of the picture is that the persons — judges, politicians and bureaucrats — who are capable of checking this distortion, are unlikely to oblige: for it would sever their power base and financial lifelines.
If the system is to be saved from sinking into greater chaos and ultimate collapse, all laws favouring the dirty and untaxed money should be repealed forthwith and intended amendments in Income Tax Law and elsewhere must be countered. The starting point should be a clear recognition of the state’s role with respect to harmonious working of legislature, judiciary and administration and repealing laws serving the rich and mighty as discussed above.
The state will have to vehemently devote its entire energies to enforcing laws that protect the public from cheats and racketeers rather than supporting a system which shelters and encourages them.
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