Post-Panama case Pakistan

The institutional structure of economy is designed to generate rents for the elite at the expense of the middle classes and the poor. So what is at stake?

Post-Panama case Pakistan

The hidden wealth of some of the world’s most prominent leaders, politicians and celebrities has been revealed by an unprecedented leak of millions of documents that show the myriad ways in which the rich can exploit secretive offshore tax regimes -- The Panama Papers: how the world’s rich and famous hide their money offshore [The Guardians, April 3, 2016]

Through the report titled, Panama Papers: Politicians, Criminal & Rogue Industry That Hide Their Cash, some of the crooks of the world -- drug dealers, mafias, corrupt politicians and tax evaders -- have been exposed. Pakistanis who are part of this undesirable club are unveiled through a year-long investigation project by journalist Umar Cheema in his write-up, Pak politicians, businessmen own companies abroad [The News, April 4, 2016].

Post-Panama case Pakistan is emerging as a dangerous place where the government is openly protecting and patronising the convicted and accused. There is no will to end state-sponsorship of organised crimes. Notorious laws -- sections 5 and 9 of the Protection of Economic Reforms Act, 1992 and section 111(4) of the Income Tax Ordinance, 2001 -- are still protecting dirty money, financing of terrorism and encouraging tax evasion. In the presence of such laws, the judiciary has punished the three-time elected prime minister -- an unprecedented move that can be a starting point to end mafia-like rule in Pakistan as happened in Colombia after years of power of dirty money muzzling institutions or eliminating those who were not purchasable.

No serious effort has been made by successive governments, both military and civil, to counter the menace of corruption and bring the enormous untaxed money into the mainstream of economy.

An important question after ouster of Nawaz Sharif is whether or not members of Parliament will revoke undesirable laws and schemes. If they do not act even now, then just eliminating one person will not serve any useful purpose. For the last many decades, Pakistan is hapless victim of terrorism, tax evasion, corrupt practices and capital flights, all due to policies of appeasement towards criminals by successive governments -- civil and military alike. These criminals are just like mafias anywhere in the world that can buy or influence politicians and officials, judges and generals, and make a mockery of rule of law.

One of the horrible experiences of mafias overpowering the entire state was that of Colombia. Notorious criminal of all time Pablo Escobar went to the extent that there was a siege on Colombia’s Supreme Court on November 6, 1985 (we also witnessed a shameful act of attack on Supreme Court on November 28, 1997). The assault marked one of the deadliest conflicts between the Colombian government and M-19 rebels. By the end of the operation, 12 Supreme Court justices were killed, along with 48 Colombian soldiers. Escobar and the Medellin Cartel allegedly provided $2 million to the M-19 rebels to finance the siege of Supreme Court. Escobar’s reach extended to government and politics, with his famous saying "plata o plomo" (silver or lead) when dealing with politicians and police: those who would not accept bribes would be eliminated.

In Colombia, Palace of Justice siege was by rebels having no respect for the law but, on August 21, 2017 in Lahore, lawyers, who are supposed to uphold rule of law, displayed the worst possible behaviour in their bid to protect two contemnors. Hooliganism by lawyers against the order of full bench of Lahore High Court testified to the trends once prevalent in Colombia.

On August 18, 1985, the police chief of Colombia’s Antioquia state, who took on the notorious Medellin drug cartel on its home territory, was shot to death in a hail of machine-gun fire near his home. The shooting came a day after judges shut down Colombia’s courts indefinitely and 50 of Bogota’s 55 appeal court judges resigned in demand for more government protection from ruthless drug lords. Are we heading towards the same kind of rule in Pakistan after the Panama Case decision? Many believe so, and if this trend is not checked, we may head towards collapse of institutions in Pakistan.

For many, the open defiance of orders of the Supreme Court by not appearing before the National Accountability Bureau (NAB) on the pretext of pendency of review petitions confirms what was pointed out by Justice Saeed Khan Khosa in Constitutional Petition No 29 of 2016 -- Imran Khan v Mian Nawaz Sharif & others : "The popular 1969 novel, ‘The Godfather’ by Mario Puzo recounted the violent tale of a Mafia family and the epigraph selected by the author was fascinating: Behind every great fortune there is a crime--Balzac".

The post-Panama case Pakistan faces challenges on many fronts, especially when the ousted leader -- Mian Nawaz Sharif -- instead of playing a positive role to reform his party on democratic lines is bent upon maligning the armed forces and judiciary. His tirade against these two institutions is bound to further weaken the State -- a State which on August 22, 2017 received threat from Trump: "We can no longer be silent about Pakistan’s safe havens for terrorist organisations".

It is time for Pakistan Muslim League (Nawaz) to stand behind armed forces rather than accusing them of "hatching a conspiracy against a popular leader with the help of judges". The confrontation with institutions at this stage can be very detrimental for Pakistan.

The real issue of Pakistan remains enforcement of rule of law. Take the example of discharging tax obligations. Even the name and shame game of tax evaders and looters of public money through Panama Papers and tax directories published by the Federal Board of Revenue (FBR) has failed to elicit public response to reject such elements. The agencies have also failed to take action and the matter went to Supreme Court.

The apathy and indifference of masses and inaction on the part of the concerned agencies on the issue of enforcing tax obligations in the wake of Panama Papers, shows that there is little hope for bringing the culprits to justice through rejection by voters or punishment by Parliament or action by National Accountability Bureau (NAB), State Bank of Pakistan (SBP), FBR, Federal Investigation Agency (FIA), and provincial anti-corruption departments.

Plundering of national wealth, rent-seeking, financial corruption, tax and money laundering are daunting challenges faced by many countries of the world and Pakistan is no exception. In fact, Pakistan is one of the worst victims of money laundering, tax evasion and plundering of public money. Lack of political will, poor enforcement capacity, corruption and inefficiency of NAB, FIA and FBR etc are the main factors leading to the present state of affairs in Pakistan for which responsibility mainly lies with the political elite. Everybody knows who introduced obnoxious laws like Protection of Economic Reforms Act, 1992 to give legal cover to dirty money for self-aggrandisement.

Amongst many proofs of rampant corruption in the society is an ever-growing size of the parallel economy and tax evasion with the connivance of tax authorities but instead of taking these matters head on, the present government gave evaders tax amnesties on several occasions between 2013 and 2016. Now another one is on the card.

No serious effort has been made by successive governments, both military and civil, to counter the menace of corruption and bring the enormous untaxed money into the mainstream of economy. All-pervasive corruption and unprecedented tolerance towards black money has made Pakistan a State where the very survival of public institutions is at stake at the hands of ruthless forces representing money power.

How can we eliminate corruption and tax evasion in Pakistan in the presence of permanent money-laundering and tax amnesty scheme in the form of section 111(4) of the Income Tax Ordinance, 2001 that facilitates the whitening of dirty money and tax evaded funds. It ensures that for money brought into Pakistan through normal banking channels no question would be asked by tax officials or FIA. Through this section, criminals and tax evaders get their undeclared money whitened by paying just an extra 3 to 4 per cent to any money exchange dealer to get remittances fixed in their names.

It is thus clear, brilliantly explained by Dr. Akmal Hussain in Restructuring for economic democracy, that "the institutional structure of Pakistan’s economy is designed to generate rents for the elite at the expense of the middle classes and the poor." It is this structural characteristic of the economy and not just bribery that prevents sustained high economic growth and equity in Pakistan. Unless we change this structure of economy, the morbid story of corruption and tax evasion will continue. In the presence of these maladies, no decision of Supreme Court can help Pakistan progress and become an egalitarian state.

Post-Panama case Pakistan