Moral high ground?

Legal eye

The writer is a lawyer based in
Islamabad.

“Every nation gets the leaders it deserves”, said French writer Joseph de Maistre. Even then there are days one wonders what might this pitiable nation have done to deserve the hand it has been dealt.

We have Nawaz Sharif, our prime minister, who will continue to dance around the issue of the quantum of his father’s wealth and his children’s wealth and how it swam offshore, but won’t answer four straight questions about the Mayfair Flats: who did the Sharifs buy them from, on what date, for how much, and where did the money come from.

Post-Panama, the charge against NS has been led by the PPP and PTI. With the PPP leading a movement against corruption, undeclared wealth and offshore assets, one really doesn’t know whether to laugh or cry. The PPP still has some of the best political minds and intellectual heavyweights within its fold, but can the Zardari-led PPP play the slayer of graft? Who can fault Aitzaz Ahsan for taking a high-minded position on dirty money? But what if he were asked to state on oath whether he truthfully thinks the Sharifs have more of it or the Bhutto-Zardari clan?

Then we have the PTI and its no-holds-barred ambition peppered with impatience. One wonders why so little thought goes into the indefensible positions Imran Khan takes? Knowing full well that he had an offshore company of his own (not to mention those of his closest allies), why would he assert that the only reason people open offshore accounts is “to either hide wealth, especially ill-gotten wealth, or to evade taxes or both”? Why wouldn’t he keep the focus where it belongs – whether the source of the money is legit or not?

The Panama scandal isn’t about defining patriotism such that anyone possessing assets outside the country be labelled a traitor or about the ease with which money can be transferred abroad. The significance of Panama for Pakistan is that it is the latest manifestation of a two-fold rot that we all know exists: public office-holders abusing state authority, making dirty money and living beyond their legitimate means, and an adversarial relationship between the citizen and the state rooted in suspicion wherein no one wishes to pay his fair share of taxes.

The second component of the problem is also more vexing in the context of public office-holders. In a country where no one pays taxes that they ought to, how do you fix the problem when the power elite in control of the state itself pays no taxes? It is in this context that comparing NS and IK is like comparing apples and peaches, Niazi Services Limited notwithstanding. But this isn’t how IK has framed the debate. By zeroing in on electoral declarations and tax payments, he has broadened the focus such that now it implicates everyone – including himself.

NS has been in power since 1985. The PTI just formed its first government in Khyber Pakhtunkhwa. NS has run Pakistan or its largest province for the most part over the last three decades. IK hasn’t. Our system of using state largess to cultivate networks of patronage and engaging in rent-seeking activities to keep them well-oiled to retain control of power is a product of the era in which the PML and PPP – not the PTI – took turns ruling the country. Panama is about public office-holders engaging in breach of trust and milking the country dry and not about citizens engaging in tax evasion.

But the manner in which the Panama debate has been framed makes no distinction between public office-holders and the rest. And that is what places IK and hundreds of other offshorers in the same boat as the Sharifs. Even the staunchest critics of IK and his politics probably don’t harbour suspicions about his personal financial integrity. The charges against Shaukat Khanum Hospital only point to lack of diligence or bad investment choices. But if you make Panama about truthful tax declarations, it’s a different debate.

If Ahmed Noorani’s story in this newspaper about IK’s tax declarations is true (there has been no denial of facts so far other than bald allegations of conspiracy etc), it seems that IK paid little or no income tax in Pakistan on his significant cricket income as a UK county player that bought him his London flat. It seems that he didn’t declare his flat to tax authorities in Pakistan, and only did so utilising a money-whitening scheme (that he otherwise opposes as a matter of principle).

IK reportedly gifted the sale consideration to his former wife, who was a UK national and had bought the Bani Gala estate, which she later gifted to IK. Even if there was any tax evasion in the 80s and 90s, it was probably regularised under the whitening scheme in early 2000s, and the use of gifts (between IK and Jemima) would be seen as tax structuring and not evasion. IK has asserted that all of this is legal. He is probably right. But it doesn’t look too good for someone who has climbed up the moral high ground does it?

Top it up with the amount of tax IK pays. IK paid almost Rs200,000 in income tax in 2013. That is about as much tax as a federal secretary pays on his salary. IK must run a kitchen for himself, even if he hosts no one, pay for utilities, pay minimum wage to house help for cooking, cleaning, guarding his estate and maintaining its lawns, feed his dogs, pay for petrol and for travel to see his kids in the UK (if not for their upkeep). How does he sustain this lifestyle and maintain his assets with the kind of income that renders him liable to pay $2000 in tax?

And what about the 15 percent tax that is due in Punjab in relation to agriculture income of over Rs300,000? Is he discharging that liability honestly? The point is: if we begin focusing on payment and declaration of taxes strictly in accordance with black letter law, IK would probably fail the text like the rest of the lot. But the Panama debate shouldn’t be about payment of direct taxes in a country of 200 million where only 0.5 percent of the population pays taxes – and that too grudgingly and by paying as little as they possibly can to get away with it.

If the Panama debate is about the past, we will need an effective law to force reconciliation of wealth and assets of public office holders with their known and legitimate sources of income. If it is about fixing corruption and tax evasion for the future, it must be about reviewing relevant laws and closing loopholes that enable rent-seeking activities of public office holders and tax theft for everyone. It can be about both things simultaneously. But once you move from the realm of politics into the domain of law, time is no longer of the essence.

The Sharifs may not be out of the woods yet, but they are no longer in the dock. The matter is being deposited with a parliamentary committee to frame ToRs, on the basis of which a legislation will be drafted, on the basis of which a commission will be constituted – which will then conduct an investigation, gather facts from across the world, and hear offshorers charged with wrongdoing before giving its findings. With all this, the Panama scandal is unlikely to be taken to its logical conclusion within weeks.

Using Panama to pull the carpet from under the Sharifs in 2016 seems improbable. Can Panama be used to paint the Sharifs black for 2018 just as the NRO was used to bring back memories of Mr 10 percent from the 90s? This is the PTI’s challenge and it is of a political nature, not a legal one.

Email: sattar@post.harvard.edu