Money Matters

Swiss safe haven

Money Matters
By Zeeshan Haider
Mon, 03, 17


Finance minister Ishaq Dar last week broke the news to the parliament that Swiss authorities have agreed to sign a convention with Pakistan allowing sharing of information to prevent tax avoidance and evasion.

The agreement, to be signed by Dar himself on March 21, would strengthen the hands of the Federal Board of Revenue (FBR) in finding details of the tax-evaded money parked in the Swiss haven.

Quoting media reports, the finance minister said a hefty amount of 180 to 200 billion dollars of tax evaded money has been stashed by rich Pakistanis in the Swiss banks.

The announcement aroused unusual excitement among many Pakistanis, who hoped that this money could now be repatriated back to the country. The agreement itself is a good development but any expectation that it would bring the money back to Pakistan is highly misplaced.

The finance minister himself in an interview evaded questions asking whether the government or the FBR had prepared any list of tax evaders, who are believed to be hiding the money in the Swiss banks. Instead, the minister asked the political parties to provide them the names, if they have, of such money.

Swiss safe havens dominated Pakistani politics in the 1990s when the previous governments of the Pakistan Muslim League-Nawaz (PML-N) launched a huge campaign against former prime minister Benazir Bhutto and her husband Asif Ali Zardari, accusing them of stashing millions of dollars raised through corruption in the Swiss banks. The Pakistan Peoples’ Party (PPP) denied these allegations as politically motivated.

Interestingly, the finance minister of the sitting PML-N government, made this announcement at a time when his prime minister and his family – since Panamagate - are facing opposition allegations of having money in overseas safe havens and buying properties in London and elsewhere from those funds.

During the Supreme Court hearing into the Panamagate scandal, the opposition revived old allegations against Dar that he laundered money for the Sharif family from Pakistan and demanded reinvestigation into the confessional statement he made during the military government of general Pervez Musharraf.

Switzerland and London are not the only safe havens where affluent Pakistanis stashed their money or made huge investments, and it is not just politicians who are involved in such practices though they have been singled out as soft targets for vilification. Pakistan’s entire ruling elite, whether political or apolitical, has been involved in such practices.

In recent years, Pakistanis have been among the top expats investing their capital into the bombing real estate sector of the United Arab Emirates (UAE) and it is widely believed that many of them are those who laundered their money from Pakistan to evade taxes.

According to some estimates, Pakistanis invested 7.73 billion dollars in the Dubai property since 2013, though recently there has been a decline in such investments.

According to the Dubai Land Department, Pakistan invested 1.2 billion dollars in Dubai property in 2016 as compared to 2.1 billion dollars in the preceding year, registering a decline of 43 percent.

While some analysts suggest that many Pakistanis brought their money back to Pakistan for investment because of improved security situation, others said growing concerns that the UAE tax authorities would share their bank details with their Pakistani counterparts forced them to bring their money back to their country.

Whatever the reason, it should now be known to everyone that keeping money in overseas safe havens is becoming difficult if not impossible.

The UAE banks have recently intimated their expat account holders that they might have to share their tax details, including those related to their countries of origin, in line with the Organisation of Economic Cooperation and Development (OECD) convention on mutual assistance on tax matters.

Pakistan has also become the member of the 104-nation grouping and has to share all such information with the member countries.

The finance minister’s personal efforts to make Pakistan part of the international campaign against dirty money must be appreciated, but these efforts would be useful for Pakistan only if the country also strengthens its institutions to deal with such crimes effectively.

Tax evasion and corruption are two major issues confronting Pakistan, and it is unfortunate that departments dealing with these scourges lack the will to handle them effectively.

Their performance came under strict scrutiny during the Panamagate scandal hearing in the Supreme Court where one judge even said that for them the National Accountability Bureau (NAB) – country’s top anti-corruption body – is dead.

Under political pressure, the FBR issued tax notices to 336 persons whose names appeared In Panama and Bahamas papers. The court was informed that 133 of them have responded, while 115 have been undelivered.

Unless these departments are relegated full powers and made autonomous, the menaces of tax evasion and graft could not be curbed in the country.

Regrettably, the anti-corruption and tax evasion laws are used for political victimisation of the opponents in Pakistan. The corruption and tax evasion cases have rarely been taken to their logical conclusion and were abandoned half-way through after cutting deals with the culprits for political reasons.

The political governments should not be the only ones blamed for such sorry state of affairs, the military regimes too were involved in similar practices.

The NAB was set up under Musharraf government to curb corruption, which soon turned into an agency involved in witch-hunting the regime’s opponents. Those tainted politicians who swore allegiance to the regime were given clean chits of health to return to politics, while hard-core opponents were brutally victimised.

The present government may sign hundreds of agreements and conventions with the foreign government and organisations to curb the trans-border flow of ill-gotten money, but these deals would produce positive results for Pakistan only if the laws to curb such illegal sources of wealth were enforced effectively inside the country.

A crackdown on corruption, tax evasion and avoidance has become all the more important as they have now become linked to black money, which is increasingly being used by terrorists to fund their activities worldwide.

Therefore, the government needs to take effective measures and strengthen its anti-corruption departments to deal with these persistent challenges to our society as well as to our economy. 

However, if Panamagate scandal is any guide, there is hardly any likelihood of effective enforcing of those laws in the near future.

The writer is a senior journalist based in Islamabad