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Posts Tagged destroying competitive business houses

Ruin comes when… HUZAIMA BUKHARI AND DR IKRAMUL HAQ

 

 

Ruin comes when…

By
HUZAIMA BUKHARI AND DR IKRAMUL HAQ

 

 

 

Ruin comes when the trader, whose heart is lifted up by wealth, becomes ruler-Plato in Republic Since November 1990, when Muhammad Nawaz Sharif became Prime Minister of Pakistan for the first time, the culture of loot, plunder, corruption, tax evasion and money laundering was legalised through obnoxious laws like Protection of Economic Reforms Act, 1992 and its likes giving a free hand to criminals that no question would be asked by tax officials and functionaries of Federal Investigative Agency (FIA) for acquiring and using dirty money. His three stints as Prime Minister and years as a minister and chief minister in the Punjab can safely be labeled as “rule of a trader” whose heart is infested with the insatiable greed of amassing wealth, expanding family-owned business empire at the expense of the national exchequer and other business houses. This fact was also noted by a judge of High Court in a reported case details of which are summarized below:

In Messrs Pak Ocean and Others v Government of Pakistan through Secretary, Ministry of Finance, Central Secretariat, Islamabad and others 2002 PTD 2850, the petitioners challenged the imposition of regulatory duty on re-meltable iron scrap, excluding bundled and shredded scrap and the reduction in the rate of duty on bundled and shredded scrap as unlawful, arbitrary, unreasonable and ultra vires Articles 4, 18, 24 and 25 of the Constitution. They contended that the said imposition of regulatory duty through Statutory Regulatory Order (SRO) was aimed at making their imported scrap very expensive as compared to the imports by big businessmen in the form of bundled and shredded scrap. According to petitioners, the adverse SROs were issued “to solely benefit the owners of the furnaces who are largely imported of shredded scrap”. In the judgment, there is a direct indictment against the House of Sharifs, contained in Para 50 that reads as under:

Khalid Anwar has mainly placed reliance on the judgment in the case of Ittefaq Foundry v. Federation of Pakistan, PLD 1990 Lahore 121. In the cited case it was contended that the petitioner was a producer of billets and that there were other producers, producing ingots, the end-product whereof was same. In order to economically ruin the petitioner in the cited case, duty structure was changed in the year 1989 without reasonable justification and the change in the duty structure was against the rights guaranteed in Articles 4, 18 and 25 of the Constitution. The contention of the petitioner was accepted and the relief was allowed. However, with the change in fortunes, the persons were feeling the pinch of oppression in the case of Ittefaq Foundry v. Federation of Pakistan, became the rulers and thereafter, they very easily and conveniently managed to forge the treatment given to them and got the duty structure changed through notification assailed in these petitions, thereby deriving huge undue benefit at the cost of total destruction of the small importers and traders of the scrap in loose form.

The above paragraph confirms beyond any doubt how traders as rulers have been playing havoc with the national exchequer and minting billions through tax concessions secured vide SROs thus destroying their competitors. Yet in the presence of these undeniable facts and court ruling the State agencies/institutions like FBR, FIA, ECP, NAB etc plead helplessness and claiming “lack of evidence” to proceed against the tax evaders and plunderers of national wealth.

 

 

 

In two articles, ‘Trail of hidden wealth’, Business Recorder, May 6, 2016 and ‘Tough times for PM’, Business Recorder, May 13, 2016, incontrovertible evidence was produced to show abuse of Protection of Economic Reforms Act, 1992 to legalise ill-gotten wealth, blatant violations of tax laws by the family of the Prime Minister and wrong declarations made by him in papers submitted to the Elections Commission of Pakistan (ECP) in 2013 as well as false/misdeclarations in returns submitted to the Federal Board of Revenue (FBR). Astonishingly, the National Accountability Bureau (NAB) still claims that “no evidence” is available to initiate proceedings against the rulers of the day.

 

 

 

The House of Sharifs has a proven track record of destroying competitive business houses but appeasing traders that politically back them and pose no threat to their “empire”. They have been passing laws to protect tax avoiders and were also beneficiaries of the same. Obviously, tax compliance does not suit the huge business empire of Nawaz/Shahbaz and family. It is not surprising that Nawaz Sharif during his third term as Prime Minister has already announced three tax amnesty schemes and now another is in the offing. In 2013, 2015 and 2016, he approved tax amnesties for tax evaders, which failed to mop up untaxed money.

On the very first day of 2016, the Prime Minister took pride in announcing a tax amnesty scheme and publically revealed that he had been asking his Finance Minister to come up with something “worthwhile” that could be “acceptable” to traders who had not been filing tax returns!! Lamentably, as Prime Minister, he openly vowed to protect the accumulation of untaxed (black) money. He never minces words for announcing schemes patronizing tax evaders and encouraging plunder of national wealth. This perhaps supports the allegations of the Opposition that he and his own family are guilty of these crimes as well, so he wants amnesty and immunities for all.

Nawaz Sharif is reportedly keen to launch yet another tax amnesty scheme knowing that his 2013 tax amnesty shockingly fetched a negligible amount of Rs 88 million from about 3000 persons! Much-publicised and negotiated with consensus (sic) Voluntary Tax Amnesty for traders, the deadline for which was extended many times, could not lure them and only 3205 got registered against the agreed target of one million new filers!

Businessmen and other citizens say they pay income tax and sales tax with electricity bills and mobile use. The rulers should not insist for tax returns as they have stacked assets worth billions of dollars abroad. For electioneering, the rulers get generous donations (chanda) from business magnates and after winning pay back through tax amnesties. Together they make billions through rent-seeking, tax evasion, and remit abroad the major portion of such ill-gotten income. Traders who have been investing billions in property in Pakistan and places like Dubai never bother to pay taxes due from them to run the State. PML(N) protects them!

According to FBR’s own study, the contribution of traders in income tax is just 0.5% and in sales tax about 1%. Like powerful absentee landlords, the traders pay meager income tax. However, they successfully keep revenue authorities at bay due to the powerful political influence they wield. The history of income tax law is fraught with provisions that were amended and/or re-amended on account of the traders’ shutter-down threats or violent demonstrations, causing legislators to get cold feet and succumbing to their demands. The governments civil and military alike have been extending amnesty schemes to tax evaders to whiten their undeclared incomes and ill-gotten wealth, for example, Ayub Khan’s Tax Amnesty Scheme of 1958, 1969 Tax Amnesty of Yahya Khan, Zulfikar Ali Bhutto’s Tax Amnesty, Self-Assessment Schemes of the 1970s, Special National Fund Bonds or Simplified Self-Assessment Scheme of the 1980s, Foreign Currency Accounts or Foreign Exchange Bearer Certificates of the 1990s, Amnesty Scheme of 2008 by PPP government, three amnesties schemes of Nawaz-Dar since 2013, various other millennium immunity schemes and the perpetual scheme in the form of the infamous section 111(4) of the Income Tax Ordinance, 2001.

Irrespective of what would be the fate of any new tax amnesty scheme, the question that emanates from the prevalent bizarre state of affairs is why traders have been defiant to file tax returns and sales tax statements? There cannot be any one definitive answer because the matter goes down to innumerable factors having roots in certain motivations as well as the draconian image of FBR. The sole responsibility for trust deficit cannot be assigned to FBR. The traders pay millions as Zakat and donations but abhor paying taxes. The general argument is that government spends money callously and for the benefit of elites.

The sanctity to make unrestrained (excessive) profits (munafaa) by traders has the authority of certain clerics. The traders borrow money at exorbitant rates from private parties but avoid banks to hide from the eyes of tax people. The lenders also remain tax-free and borrowers accumulate untaxed money by fleecing masses. There are no effective controls to check unscrupulous traders from charging unreasonable prices.

The clergy in general, with a few exceptions, plead against paying taxes and ask traders to pay Zakat. Resultantly, the greed to amass wealth becomes an obsession violating all social and moral obligations. Thus, adulterating eatables, incorrect measurements, selling defective or sub-standard products, misrepresenting, providing unprofessional services, defrauding customers, refusing to honor guarantees or other duties as abiding by governmental laws regarding trade or payment of taxes, are not considered immoral or violating laws.

All is fair, as long as one is able to stuff one’s pockets with paper money and then have the audacity to squander it in an ostentatious display of wealth and power. Such behavior is visible in the length and breadth of our entire society. Apart from an ignorable number, the majority of traders from a petty fruit/vegetable vendor to the owner of large departmental stores leave no stone unturned to swindle an unassuming customer as well as the concerned government agents with whose connivance they easily manage to evade their national duties.

Non-compliance of tax obligation is a grim reality of Pakistan. The State has failed to fulfill its basic obligations-protection of life and property, health, education, housing and transport etc. In our peculiar milieu, the government needs to educate the masses through the same platform that is used by clergy. The mosques should be under state control, headed by trained teachers who are adequately paid the same model exists in a majority of Muslim countries. Primary education should start from the mosques.

The trader-mullah nexus for non-payment of taxes and huge amounts extracted for madrassahs are issues that need to be debated and handled democratically. These are critical for our existence as a democratic country lest we continuously slide towards mullocracy, extremism, and militancy that have disastrous effects for societies, and are destructive to humanity. Tax defiance and corruption in Pakistan are closely linked with rulers-cum-traders-who are unscrupulous and their greed is unbound. Plato aptly said in the Republic that ruin comes for a country when traders whose hearts are filled with greed become rulers. This is what we are witnessing in today’s Pakistan.

(The writers, lawyers, and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS).)

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