Curing Pana(mania)

In the wake of the prime minister’s speech in parliament on May 16, the people of Pakistan have become more disillusioned about the conduct of their political leaders with respect to discharging tax obligations and speaking the truth. They believe that both the opposition and the government are engaged in mudslinging rather than trying to find a viable solution to avoid chaos in an already highly troubled country.

Political stability is essential for economic growth as is transparency for democracy. This should be the main agenda of the national leadership. However, our parliamentarians are engaged in a war of words, while not taking legal recourse against the prime minister by filing a case of disqualification. This just shows how ‘sincere’ they are about accountability. In fact, they have diluted the issue by agreeing to negotiate on the terms of reference (ToRs) and then burdening the judiciary with a task that will bear no fruit.

First there was a tug of war on forming a commission under the Pakistan Commissions of Inquiry Act 1956, a move rejected by Supreme Court in view of the wide ToRs given by the government. The opposition wanted the enquiry under a special commission to be framed by a new law – the ‘Panama Papers (Inquiry and Trial) Act 2016’.

The Supreme Court rightly asked the government to come up with specific ToRs. And even if there is consensus on the ToRs, a commission is not an answer to counter the menace of corruption, flight of capital and tax avoidance. This requires a fundamental restructuring of the state institutions.

Across-the-board accountability is not possible unless the state institutions are free of politics and the process starts from the top. The question is: who will scrutinise the declarations of assets/liabilities at home and abroad (including those held as benami) of politicians, high-ranking civil-military officials and judges? It should be done democratically, transparently and fairly, through a legislative instrument. That should comprise senators and members of the National Assembly (representing all parties).

The accountability should not be person-specific. Nawaz Sharif has already offered himself and his family up for probe. Let it be through the House committee. This task should not be given to the Supreme Court, which is already over-burdened with thousands of cases every year. As the custodian of the constitution, it will always be there as the final arbitrator in case of any disagreement in the Committee or if any assistance is needed from the court.

The more important task for parliament is to pass a law to punish those who are guilty of hiding untaxed/undeclared assets abroad. This has been done successfully in many countries. This law, the ‘Undisclosed Foreign Income and Assets (Imposition of Tax) Act)’, should make it mandatory for the Federal Board of Revenue (FBR) to produce declarations filed by elected representatives, public officeholders and state functionaries.

The committee would then compare declarations filed under the Civil Servants Act, 1973, Army Act, 1952 and related rules, Representation of People Act, 1976, the Senate (Election) Act, 1975, Rule 4 of the Political Parties Rules, 2002 with those filed under the income tax Law. In case of any discrepancies or suppression or concealment, the committee could ask the ECP, NAB, FIA, FBR, military authorities, etc – as the case may be – to take action under the law.

The Panama Papers and other similar disclosures made so far or expected in the future constitute a campaign against those who undermine state institutions, destroy the democratic dispensation and promote a culture of greed and lawlessness. This campaign, however, should not violate the fundamental rights of anybody, including public officeholders. The probe of assets and tax declarations should be done legally and not through malicious media campaigns.

The name and shame game in tax delinquency, however, should not be confined to members of parliament alone. It must cover all, especially those belonging to the powerful segments of society. All persons in the service of Pakistan, holding or elected to public office should make public their wealth and expenditure statements filed under the respective laws governing them.

The tax system is one of the fundamental elements of constitutional democracy. If elected members do not discharge their tax obligations diligently, not only does the entire system get discredited, they also lose the moral right to represent the people. No taxation without representation is a cardinal principle of democracy. Article 77 of our constitution says that no tax shall be levied for the purposes of the federation except by or under the authority of an act of parliament.

If lawmakers commit any lapse, they must be punished more rigorously than others since they are supposed to be the custodians of public faith and money. As a starting point, the finance minister, being in charge of the FBR, should appear before the House and explain why taxmen have failed to take action against the majority of the members of parliament – who live lavishly, but declare shamelessly low incomes.

All this is evident from the tax directories for the tax years 2013 and 2014 published by the FBR. Why hasn’t any action been taken against them by the FBR so far? The answer to this question will expose how political masters cripple state institutions.

The FBR must start taking action against parliamentarians who have been concealing their real incomes and assets. Until this is ensured, we can never promote a tax culture in the country. Of course, nothing will change if the elected members, public officeholders, bureaucrats, generals and judges are not made answerable for their assets (in own name, family, relative and benami) vis-à-vis their lifestyles. Their conduct should be exemplary and affairs so transparent that nobody can think of violating the law.

As a first step towards reforms, accountability should start from parliament and by parliament. Those found guilty should be punished adequately and expeditiously after due process. There is no other way to deal with the situation.

The writers, tax lawyers, are visiting professors at Lahore University of Management Sciences (LUMS).

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