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The power of dirty money

The ever-growing informal economy and unlawful money outflows are undermining economic growth

The power of dirty money

Tackling the dual menaces of unlawful outflows and tax evasion is not our peculiar problem. Many governments of the world are facing challenges of checking flight of untaxed money. Wealth management specialists estimate that the world’s wealthy entrust around $36 trillion in tax havens — share of Pakistanis is around US$100 billion.

According to the World Bank’s Stolen Asset Recovery initiative estimates, the cross-border flow of proceeds from criminal activities, corruption and tax evasion is between $1 trillion and $1.6 trillion per year, about half of which comes from the developing and transitional economies.

According to a report, about 61 per cent of parliamentarians in Pakistan declined to answer “whether they have property/assets abroad or not” while filing their asset declarations to the Election Commission of Pakistan. Out of 1,173 members of the Senate, National and Provincial Assemblies, 715 either dodged the question on the form or left it blank. The question does not ask details of those properties but merely requires a “yes” or “no” to the question.

The 715 MPs who refused to answer include many who have, during public appearances, openly mentioned owning assets abroad. Of those who answered the question, only 24 admitted to owning assets outside Pakistan. No legislator from Balochistan or Khyber-Pakhtunkhwa was among those who admitted to owning foreign assets.

“The total value of the foreign assets declared by the 24 legislators who did admit to owning them was estimated to be Rs1.4 billion. Of that amount, Rs620 million is owned by six MNAs, Rs62 million by four senators, Rs500 million by seven members of the Punjab Assembly and Rs215 million by seven members of the Sindh Assembly,” the report claims.

Successive governments have been pardoning the corrupt and appeasing tax evaders through various laws and amnesty schemes. The result is obvious.

Of the legislators who do own assets abroad, real estate in the UK and the UAE are the most popular investment choices. Of the four senators who own assets abroad, Rehman Malik owns Rs3.39 million worth of assets in the UK, Ghulam Nabi Bangash owns property worth Rs25 million in the UAE, Abbas Afridi owns a business worth around Rs23 million in Afghanistan and Dubai, and Jaffar Iqbal shared a house worth Rs9 million with his wife in the UK. The six MNAs who have assets abroad are Malik Asad, who owns a flat in Bangkok worth Rs110 million, Jaffar Iqbal owns a flat and taxi licence worth around Rs26 million in Norway, Basit Bokhari has shares in Kando Transport Company abroad worth Rs0.8 million, Sohail Mansoor owns two flats in the UAE, one in London and three in Canada worth Rs71 million, Amir Hoti took remittances worth Rs8 million from the UAE and Pir Sadruddin Shah’s family owns a palace abroad worth Rs186 million.

The seven MPAs from Punjab who own property are: Chief Minister Shahbaz Sharif, who has two properties worth Rs153 million in London, Chaudhry Lal, who owns property worth Rs170 million in UK, Amir Inyat owns property worth Rs3 million in the UAE, Abdul Qadeer Alvi owns property worth Rs8 million in the UAE, Ali Raza owns a one-bedroom flat worth Rs60 million in London, Ihsanul Haq owns a family suite worth Rs70 million in Dubai and Omer Jaffer shares a family suite worth Rs10 million with his wife in London.

The MPAs from Sindh who own foreign assets are: Masroor Ahmed and his wife who own property worth Rs17 million abroad, Faseeh Ahmed owns a flat worth Rs18 million in Dubai, Nadir Ali owns a house worth Rs9 million in the United States, Makhdoom Rafique owns property worth Rs35 million in Middlesex UK, Shirjeel Memon owns two Dubai flats that cost Rs25 million and his wife owns a Dubai villa that costs Rs99 million, Awais Muzaffar and his wife own two flats worth Rs5 million in Dubai, Muhammad Abdul owns business worth Rs2 million in Madinah and Irfanullah Khan owns property worth Rs1 million abroad.

The vital questions are whether these assets have been declared in tax returns or not and whether sources are explainable or not. On January 9, 2015, Chairman Federal Board of Revenue (FBR), on a question by a member of Senate’s Standing Committee on Finance, Revenue, Economic Affairs, Statistics and Privatization as to why letters were not written to big businessmen and politicians asking them to show their foreign properties and wealth in their tax returns, stated that “it was their statutory responsibility.”

He said that most of the assets held abroad were benami (benami transaction is any transaction in which property is transferred to one person for a consideration paid by another person). The Chairman FBR and members of Senate did not discuss why Pakistan had failed to pass a prohibition law against the benami transactions as was done by India in 1988. The Indian Benami Transactions (Prohibition) Act, 1988 prohibits benami transactions and the right to recover property held as benami.

This shows the seriousness of our legislators and tax administrators in dealing with the assets held benami at home or abroad. They just pay lip-service to counter tax evasion and unlawful outflows of money from Pakistan. In fact, they are not at all serious to curb these menaces. It is evident from the fact that since 2010 no case was filed by Pakistan with the Swiss government under Return of Illicit Assets Act (RIAA) — on October 1, 2010, the Swiss Parliament passed this law making it possible for developing countries to recover funds shifted to the Alpine State by unscrupulous individuals and companies. It has nothing to do with Avoidance of Double Taxation Agreement with Switzerland under which exchange of information can be sought. Our so-called experts sitting in Law Ministry, Finance Ministry, NAB and FBR have not even bothered to study this law.

Our finance minister is perhaps not aware of the fact that over the last 20 years, the Swiss government returned more than $2.5 billion in assets of criminal origin from some of the most famous kleptocrats in history such as Sani Abacha of Nigeria, Ferdinand Marcos of the Philippines and Carlos Salinas of Mexico. After 5 years, Nigeria got $700 million of its plundered wealth back from Switzerland and Philippines recovered its $684 million looted by Ferdinand Marcos.

Though promised many a times during election campaign, the present government has till today made no effort to bring US$60 million kept by ex-president Asif Ali Zardari abroad. There are allegations that many in power and in opposition have also undeclared, untaxed assets abroad and thus they would never take any action that can later boomerang.

According to a conservative estimate, tax evaders in Pakistan annually deprive the country of revenue of over US $10 billion — but the government, instead of putting them behind bars, encourages their unlawful activities. The FBR has miserably failed to tap untaxed money. The governor State Bank of Pakistan made a startling disclosure before a parliamentary committee on October 1, 2013 that $25 million in foreign currency was illegally flowing out of the country each day from the airports — annually $9billion! Investment flow from Pakistan to Dubai in 2013 and 2014 in real estate was over Rs430 billion.


Successive governments, instead of dealing effectively with untaxed money, have been pardoning the corrupt and appeasing tax evaders through various laws and amnesty schemes. The result is obvious. There is an ever-growing informal economy and unlawful outflows undermining economic growth.

Those having “dirty money” control economic resources and politics. One of the worst consequences of ‘money power’ is its pernicious effect on the general moral fabric of society. It puts integrity at a discount and places a premium on vulgar and ostentatious display of wealth. This shatters the faith of the common man in the concept of dignity of honest labour and virtuous living.

It is, therefore, no exaggeration to say that ill-gotten wealth is like a malignant growth in the country’s economy which, if not checked in time, is certain to culminate in its doom. It is high time that the government constitutes a National Commission to determine the size of untaxed money and suggest ways to bring it back into the fold of formal economy.

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