For a tax-clean Imran

Part - II

It was January 4, 2012 when Part I of this article was published. I did not anticipate then that Part II would also be written but, thanks to Imran, here it is.

What inspired Part I was a bold statement by Imran (at the time) that he would be declaring his assets within a month, which I thought was a little odd for someone who had been filing his tax returns in accordance with the law. I suggested that it shouldn’t take me more than five minutes to find out, which then raised the question whether Imran had truly been filing his tax returns.

So I asked him six questions (alas not seven), which included the following: when was the first time you filed income tax returns? When was the first time you filed a wealth tax return? When was the London flat acquired and was it, with any other assets (such as bank accounts) outside Pakistan, disclosed in the wealth tax return?

I requested Imran to answer himself not through a PTI spokesperson. He chose to respond through his tax advisers (M/s Yousaf Islam), and this is what they said in a letter published in these pages on January 7, 2012:

“We refer to Salman K Chima’s article ‘For a tax-clean Imran’ published in The News on January 4. We are the tax advisers and accountants for Imran Khan, the chairman of Pakistan Tehreek-e-Insaf. In this capacity we are fully conversant with Pakistan’s tax laws. We have been filing his tax returns for more than three decades and we wish to state that Imran Khan has never defaulted in the submission of his income tax and wealth tax returns.

“In accordance with the tax laws of Pakistan, the flat located in England was duly declared in his returns as well as his income from cricket, advertising etc. It is further stated that Imran Khan was never served with a notice by the income tax department alleging concealment and evasion of any income. He has a clean history in this regard.”

Recent disclosures suggest that the response was not entirely forthright, but even at the time it appeared evasive. I therefore suggested as follows, which was published in these pages on January 11, 2012:

“I for one would be much relieved to find Imran tax-clean. The difference however is that unlike many of his admirers, I am not willing to assume that anymore – he has to prove it. … I raised some questions hoping that a forthright reply would clear the air. Imran has responded through his tax counsel, which is a welcome step. It is also reassuring that he has filed returns for over three decades.

“Beyond that though, the response skirts the questions raised in the article. For instance … while it is stated that the London flat is disclosed, one is left guessing whether this was in 1982 (which is when the flat was acquired) or more recently. Other questions too have been ignored. … One gets the impression (perhaps incorrectly but nonetheless) that the response hides as much as it reveals.”

I proposed to Imran that he should consider making his tax returns public, or at least to place them before a person we trust who should certify him to have a tax-clean record. I suggested the name of Dr Parvez Hassan.

That was not to be. But it transpires now (one draws this from Imran’s own statement outside parliament) that his London flat may not have been disclosed in Pakistan until 2002, when it was disclosed to the Election Commission. Otherwise, he would have produced an earlier return or declaration. Indeed, the offshore company through which the flat was held may never have been disclosed at all.

This raises some further questions for Imran to answer – just three not 70. But which I am sure he would like to answer in the exact same spirit in which he expects others to respond to his questions.

Knowing that the London flat was acquired in 1983, one presumes that this was declared in the years 1983-2002 under the Wealth Tax Act 1963 (which was only repealed in 2002). Are you able to make public the exact returns in which such declaration was made? Your consultants skirted this question in the earlier round but it needs to be answered now. *

If the first disclosure of the flat was made in 2002 (which one hopes is not the case), was it because of the Wealth Tax Act and the tax consequences thereunder that you withheld this information? Coincidentally, the Wealth Tax Act was also repealed the same year as the flat was disclosed. *

* You have mentioned that you sold the flat (or more accurately the shares of the offshore company that owned the flat) at a huge capital gain and that the funds were subsequently remitted to Pakistan. Did you pay income tax on the gain?

It may help the reader to point out (as I had in Part I) that a Pakistani resident was required to declare and pay wealth tax on his worldwide wealth, and that one only needed to reside in Pakistan for 365 days in four years to fall in that category. So even if the flat was acquired through earnings abroad, it was still required by the laws of Pakistan for it to be disclosed and for wealth tax to be paid on it.

Regarding the fact that the sale proceeds of the flat were remitted in foreign currency in Pakistan through the banking channel, Imran may have been able to avail indemnity regarding the source of the remittance.

But now that we know from Imran himself that he made a huge capital gain on the sale of the flat, one wonders whether the tax authorities would be within their rights to question him regarding this capital gain and whether it was accounted for in the tax returns. For ordinary mortals, ‘concealing’ income is an offence punishable with imprisonment as well as fine.

Imran is too well aware of the constitution so one need not remind him that according to the document: “A person shall be disqualified from being elected a member of the parliament, if he has defaulted in payment of government dues in excess of ten thousand rupees, for over six months, at the time of filing his nomination papers”.

The writer is a Lahore-based lawyer.

Email: salmanchima@gmail.com