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NAB, elites and rent-seekers

Countering corruption, rent-seeking, black money and tax evasion is a daunting task in Pakistan

NAB, elites and rent-seekers
Nawaz Sharif faces NAB.

“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”— Economics of corruption, Dr. Akmal Hussain.

“Corruption is cancer which is a silent killer and NAB is absolutely committed to rooting out corruption in all its forms and manifestations with iron hands”—Justice (R) Javed Iqbal, Chairman NAB.

The Chairman of National Accountability Bureau (NAB), while addressing a ceremony on the occasion of International Anti-Corruption Day, held in President House on December 9, 2018, said, “I have been successful in making people in power realise that those involved in corruption will have to give an answer”. He questioned that “what is wrong in asking from the people about their means of income who owned a 70cc motorbike in the past but today own huge towers in Dubai”? He also assured the bureaucrats that they would not be proceeded against unlawfully but warned them not to follow illegal orders of the political masters or indulge in activities for self-aggrandisement.

In the past as well, the predecessors of Justice (retired) Javed Iqbal, while celebrating anti-corruption days or even weeks, expressed similar resolves and presented their “achievements” (sic) and future plans to counter the menace of corruption from society. NAB has been organising seminars, workshops, and holding competitions in speeches, paintings, poetry, and essay writings for students to create awareness about corruption. The main emphasis is on the point that corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines development and rule of law and is a breeding ground for organised crimes in a society and thus we have to eradicate it.

It may be recalled that in the wake of immense pressure from Supreme Court of Pakistan and criticism from media and public, NAB in 2014 finally unveiled a comprehensive ‘National Anti-Corruption Strategy (NACS)’ for eradication of corruption and fraudulent practices throughout the country. It was claimed in NAB’s Annual Report of 2014 that since its inception, the Bureau had recovered Rs265 billion from “corrupt persons”, which is a “record achievement”. The updated figure up to September 2018, as per NAB, is Rs296 billion.

While NAB takes credit of what it calls, “extraordinary performance”, Pakistan is ranked abysmally low on the global Corruption Perceptions Index (CPI) 2017 — the country is making little or no progress towards tackling the menace of financial misconduct, according to Transparency International (TI). The composite index has ranked Pakistan 117th out of a total of 180 nations worldwide based on the level of perceived public sector corruption. The country has failed to improve on a CPI 2016 score of 32, and has instead dropped down on the global list, from 116 to 117. The score of Pakistan was well below the CPI average of 43 for the year 2017.

Countering corruption, rent-seeking, black money and tax evasion is a daunting task in Pakistan. Till today no serious effort has been made by successive governments, civil and military alike, to eradicate these maladies by structural reforms — to remove causes behind these. For example, the beneficiaries of free and concessional plots — mighty men in robes, khaki and mufti — are not considered doing anything wrong as it is an official (sic) policy to give them what belongs to masses. So it is not strange if much-publicised anti-corruption day or week or conferences or seminars by NAB ever touch such vital areas.

People of Pakistan want NAB to nab those who make lots of money by transferring plots allotted to them at nominal rates at extravagant prices and yet do not pay a single penny as tax [though this constitutes ‘adventure in the nature of trade’ and is chargeable to tax under the Income Tax Law]. How some powerful men are engaged in this profit-making venture is a not a secret, yet not a single case has been registered so far against any tax evader and tax official although both are responsible for colossal revenue loss to the national exchequer.

As many as 1160 parliamentarians have not paid Income Support Levy, imposed in tax year 2013, till today. The NAB has not taken action against the defaulters and officials of Federal Board of Revenue (FBR) who failed to recover the due tax and caused loss of billions to the national exchequer. Pakistan is a unique country where the State, instead of combating tax evasion extends protection in the form of Protection of Economic Reforms Act, 1992. The enforcement is so lax that smuggling of foreign currency through carriers, capital outflows through foreign currency accounts, hawala and hundi and flight of capital are daily phenomena, courtesy appeasement of the corrupt and criminals and/or connivance of the officials. Every year, billions of dollars are sent abroad (in 2017 figure was US$15 billion) and then a part of this untaxed/tainted money, hidden in tax havens, is legitimised using facility provided by the State — tax amnesties, immunities and section 111(4) of the Income Tax Ordinance, 2001.

Pakistan is thus a classic case study of unchecked and unabated rent-seeking elitist-captured State. Our economy has been losing billions since 1991 when many money whitening schemes and Protection of Economic Reforms Act 1992 were introduced by the then government to legitimise untaxed and ill-gotten assets — it was done cleverly in the name of liberalisation of economy — see details in Pakistan: Enigma of Taxation, Pakistan: From Hash to Heroin and its sequel Pakistan: From Drug-trap to Debt-trap.

Our elites — indomitable militro-judicial-civil complex, corrupt politicians and unscrupulous businessmen — have been “engineering” or “interpreting” laws for self-aggrandisement while the poor and helpless in this Land of Pure, though burdened with exorbitant indirect taxes get nothing in return.

Parliamentarians’ Tax Directories for tax years 2013, 2014, 2015 & 2016, published by FBR, show laughable quantum of incomes of majority of elected members, yet NAB has taken no action till today. They have assets inside and outside the country — mostly held benami as defined in Benami Transactions (Prohibition) Act, 2017. The NAB lacks expertise to investigate the white collar crimes.

Way back in April 2012, then President Asif Ali Zardari promulgated Finance (Amendment) Ordinance, 2012 to facilitate investment of ‘hidden money’ in the capital market. This immunity was an outrageous violation of the Anti-Money Laundering Act, 2010, protecting mafias controlling stock markets because they were/are their fund managers (do business through benami accounts). Since majority of parliamentarians were not filing tax returns and wealth statements prior to 2013 on the plea that tax deducted from their emoluments was sufficient, they took advantage of law for whitening untaxed money at stock exchanges. The NAB has never investigated this blatant abuse of powers and booked any public office holders and their abettors who minted billions as tax-free investments at the expense of national kitty.

The ultimate cynicism that afflicts a society is acceptance of corruption as a way of life. Unfortunately, after 70 years of independence, this is precisely where we have reached as a nation. There is a general perception that NAB has been only victimising political opponents at the behest of masters of the day. The NAB Chairman must realise that corruption is not an isolated phenomenon. The issue is dismantling of structures giving rise and protection to it. Pakistan cannot progress unless foundations of corruption are destroyed, and assets of plunderers of the national wealth and tax evaders are confiscated.

Will the present government pass an asset-seizure legislation to confiscate all untaxed and unlawfully acquired assets? The mighty men in power will never allow it. They are keen to destroy businesses of the ordinary people in the name of encroachments but not ready to punish those who took money from them for illegal settlements. Strangely when the case of lease cancellation in Grand Hyatt Hotel scam came before apex court, it was held that interest of buyers would have to be kept in view. Strangely, this principle was not applied in many other cases. Is it because the buyers of Grand Hayat Luxury Apartments include the incumbent prime minister and a retired chief justice of Supreme Court? In the case of rich and mighty “regularisation” is fine, but for the weak, the only prescription is “bulldozing”.

Dr Ikramul Haq

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