OPINION
The day of reckoning
03 Feb 2021
When the good times are rolling very few have the foresight of seeing the storm around the corner. Whilst it takes time to accumulate gains, reckoning is usually a quick phenomenon when it suddenly strikes…
As I have noted, the elite of Pakistan have enjoyed a very good run, especially since 1992 i.e., after the enactment of the Protection of Economic Reforms Act and some other near criminal acts against our nation. It became extremely easy to create tax-free wealth and stash it abroad, and our gluttonous elite availed every opportunity to indulge in it. I have discussed this in detail in my books and articles. Successive governments have tried to bring back this wealth, however as a seasoned financial advisor I know for certain that once money leaves the shores it is very difficult to bring it back; those who say otherwise are trying to fool people. So the party continues… for now.
However, post-2020 we do not live in the same world, the developed countries, where the wealth of our nation is mostly stashed are under a severe strain and three prominent themes are originating from the Covid pandemic:
- How to cover the financial distress caused due to the pandemic. This will inevitably entail higher taxes especially wealth tax;
- How to solve the problems of inequality in society where some people have made large fortunes whilst most of society members suffer;
- Falling real returns on assets …. Those who want to talk about the stock markets, please note that the performance of stock markets has been totally divorced from the real performance of economies.
Who do you think will this impact the most? I feel this will be the elite of developing countries who have stashed their wealth in these western “safe havens”. Yet the day when these havens will be the least safe for our elite is soon approaching. Laws, unthinkable only until a few years, are firmly in place, an example of which is the Unexplained Wealth Order (UWO) of 2018, in the UK (one of the most popular destinations for foreign capital) where the onus is on the person to prove the source of his or her wealth.
Most of the wealth of our elite is undeclared, it is not necessarily always income from corruption or other illegal activities, it could be legitimate income from a legal business that was simply not declared or taxed. However, in the eyes of many jurisdictions, undeclared income due to any reason is fair-game and can be subjected to confiscation. Many might not know this but confiscations under the UWO have picked up pace recently.
Laws like this are only the beginning, confiscations of undeclared wealth solves a lot of problems that I have noted above for these developed countries and trust me no one in the developing or developed world will shed a tear when we see mass confiscations for such elite.
If you do not want to bring it back at least declare it here, so that you have some protection against foreign authorities although full protection is still not guaranteed.
Operating in the developed countries is completely different from operating in Pakistan; there your connections or “nepotism” cannot save you and, there are no easy “settlements” for small sums. The advisors that you might have for these matters are either outright scamsters, incompetent lackeys or at best lower tier professionals – top grade professionals in developed countries will not do business with undeclared/risky clients.
I have given up hope in appealing to the patriotism and honour of our people because this approach has failed miserably. What has driven me to sheer despair is the prospect that it would be the most horrible fate for the wealth of our nation to be confiscated in foreign lands to finance their deficits, whilst our country is ravaged by poverty and is perpetually holding the begging bowl.
Copyright Business Recorder, 2021
