After the leaks

May 07,2016

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The Panama leaks have jolted most parts of the world. The 11.5 million documents that have been leaked are still a bit of a mystery. While the issue of the Panama leaks is ridden with questions, there is no doubt that this topic has invoked a lot of rage in Pakistan.

Opposing political parties, not surprisingly, are trying to get political gains from the misery of the ruling elite. On the other hand, the ruling party’s blatant partisans are busy defending Sharif with ad hominem logic. All this leaves the common man in a state of utter confusion and disappointment.

Clearing the confusion created by the sudden stir of the leaks is fundamental to ensure that the common man can fully grasp the magnitude of the incident.

Panama is a Central American country with a population of around 3.9 million. It is considered a tax haven – a country where foreign individuals and companies are taxed at very low, or even non-existent, rates — that offers less regulations and more privacy. The investors prefer registering offshore companies primarily for the purposes of tax avoidance. It is pertinent to realise the difference between tax avoidance and tax evasion, with the latter being a crime and the former a seemingly profitable business strategy.

So why are we interested in Panama? On April 3, an unprecedented leak of 11.5 million files from a database of the world’s fourth biggest offshore law firm, Mossack Fonseca, was perpetrated by the International Consortium of Investigative Journalists. The documents have brought to light the multitude of ways in which the rich have been taking advantage of discrete offshore tax regimes. Among the people involved (the count comes out to be 143 politicians), a whopping 12 are national leaders. Apart from that, the families and close associates of the aforementioned politicians are also reaping the benefits of these tax havens.

The aftermath of these leaks led to outrage in nations whose leaders were accused of having offshore companies in Panama. The reaction in Pakistan was no different. Imran Khan was quick to demand the prime minister’s resignation because of the claim that the latter’s son owns offshore companies. And his demand gained impetus after the resignation of Iceland’s prime minister and Spain’s minister of industry over the very same issue. However, there are important distinctions that need to be made between the aforementioned officials and Pakistan’s prime minister.

As far as Spain’s minister of industry, Jose Manuel Soria, is concerned, it needs to be understood that Soria was the acting minister for industry and not the permanent minister. The key distinction is that he held a temporary position and was not an elected representative of the masses. Comparing him to Sharif, who is an elected prime minister and has the mandate of 200 million people for a five-year period, would be unfair.

As far as Iceland’s prime minister’s abdication is concerned, it should first be noted that it was not a formal resignation, and he merely left his office “for an unspecified period of time”. So, it is more of an indefinite leave of absence and not a resignation per se. Moreover, the offshore company owned by Iceland’s prime minister lost a fortune as a result of the 2008 financial crisis, which severely crippled Iceland. This resulted in the company claiming millions from Icelandic banks, which clearly presented a conflict of interest for the prime minister.

Clearly, Sharif can’t be compared with him for multiple reasons. Firstly, Nawaz Sharif was only bound by law to declare his assets and those of his dependents, which include his wife and not his children, who happen to be owners of the offshore companies. Secondly, there is no actual evidence of any conflict of interest and no evidence that any of the offshore companies owned by Sharif’s family benefitted from any undue favours at the expense of our national exchequer.

The demand for his resignation, before the investigation, is farcical. Now, after the admission of Jehangir Tareen regarding his family’s ownership of offshore companies, Khan’s demand for Sharif’s resignation seems rather ironic. Let’s not forget that there are 212 other Pakistanis who own offshore companies and nobody should be given preferential treatment. Also, it needs to be understood that creating or owning an offshore company is not a crime.

MKhan needs to realise that demanding the PM’s resignation will not be beneficial for him in the long run, and will only lead to a political impasse. Instead, accountability and democracy need to be prioritised. Democratic values should not be compromised in the name of justice propelled by vigilantism.

Political point-scoring at the cost of democratic norms is not the answer. The only logical solution is an independent judicial commission empowered to probe the matter.

The writer is a freelance columnist.


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