Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280 billion in lost income tax revenues, according to a research released on 22 July 2012.
Estimating the extent of global private financial wealth held in offshore accounts – excluding non-financial assets such as real estate, gold, yachts and racehorses – the study puts the sum somewhere between $21 trillion and $32 trillion. The research was carried out by James Henry, former chief economist at consultants McKinsey & Co for Tax Justice Network, which campaigns against tax havens. He used data from the World Bank, International Monetary Fund, United Nations and central banks.
The report also highlights the impact on the balance sheets of 139 developing countries of money held in tax havens by private elites, putting wealth beyond the reach of local tax authorities. The research estimates that since the 1970s, the richest citizens of these 139 countries had amassed $7.3 to $9.3 trillion of “unrecorded offshore wealth” by 2010. Private wealth held offshore represents “a huge black hole in the world economy,” Henry concludes in his study.
The report is published amid growing public and political concern about tax avoidance and evasion. Many authorities, including in Germany, have even paid for information on alleged tax evaders stolen from banks. Henry has revealed that the super-rich move money around the globe through an “industrious bevy of professional enablers in private banking, legal, accounting and investment industries.
The lost tax revenues, implied in this report, are huge – large enough to make a significant difference to the finances of many countries. This study is good news from the perspective that the world has located a huge pile of financial wealth that might be repatriated to contribute to the solution of most pressing global economic problems. Many countries have already taken concrete steps to retrieve lost taxes by signing agreements with countries where hidden wealth is lying.
Pakistan can also take legal measures to bring back looted and untaxed money from abroad as has been done by many countries of the world.
India has recently renegotiated existing tax treaty with the Swiss government, as has been done by other countries, to retrieve billions in taxes if not the entire funds. It has also signed agreements for exchange of information with many tax havens.
Officially in Pakistan, the Zardari regime will never take any such step as his own looted wealth is lying abroad. The same is true for many other politicians, businessmen and high-ranking officials.
Unfortunately, private efforts to invoke extraordinary jurisdiction of Supreme Court to bring looted wealth and untaxed money have also failed. The Supreme Court declared the petitions filed by a few private parties as “non-maintainable”. On this vital issue no suo muto action has been taken by Supreme Court, which has raised many eyebrows. Many allege that near and dear ones of some of the judges have also kept undeclared assets abroad and therefore there is complete silence on this issue from the Chief Justice of Pakistan.
On the contrary, the Indian Supreme Court, in its historic decision of July 4, 2011 in the case of Ram Jethmalani and Other v Union of India reported as 2011 PTR 1933 (SC India), set up a ‘Special Investigation Team’ to supervise the Government-led investigations into black money of Indians lying abroad. The decision, given by Indian Supreme Court in pursuance of a Writ Petition filed by Indian veteran leader and lawyer Ram Jethmalani alleging inaction by the Government on unearthing of unaccounted money, has special significance for Pakistan. The apathy of rulers in Pakistan in investigating looted money lying abroad is a great cause for concern. Unfortunately, the government has successfully flouted the Supreme Court of Pakistan’s judgement in the famous NRO case. The Supreme Court has also not made it an issue of public importance and its sole stress on Swiss Case related to Zardari has made the entire process person-specific.
The directions given by the Court in Dr Mubashir Hasan and others v Federation of Pakistan (2010 PLD SC 265) have yet not been complied with–the President and his son, PM, both present and former, in fact, entire People’s Party including Aitzaz Ahsan are accused of showing open defiance. The Supreme Court of Pakistan in 2010 PLD SC 265 held:
“Since the NRO, 2007 stands declared void ab initio, therefore, any actions taken or suffered under the said law are also non est in law and since the communications addressed by Malik Muhammad Qayyum to various foreign fora/authorities/courts withdrawing the requests, earlier made by the Government of Pakistan for mutual legal assistance; surrendering the status of civil party; abandoning the claims to the allegedly laundered moneys lying in foreign countries including Switzerland, have also been declared by us to be unauthorised and illegal communications and consequently of no legal effect, therefore, it is declared that the initial requests for mutual legal assistance; securing the status of civil party and the claims lodged to the allegedly laundered moneys lying in foreign countries including Switzerland are declared never to have been withdrawn. Therefore the Federal Government and other concerned authorities are ordered to take immediate steps to seek revival of the said requests, claims and status”.
The Court also observed in this judgement:
“A Monitoring Cell shall be established in the Supreme Court of Pakistan comprising of the Chief Justice of Pakistan or a Judge of the Supreme Court to be nominated by him to monitor the progress and the proceedings in respect of Court cases (explanation added in detailed reasons) in the above notices and other cases under the NAO, 1999. Likewise similar Monitoring Cells shall be set up in the High Courts of all the Provinces comprising the Chief Justice of the respective Province or Judges of the concerned High Courts to be nominated by them to monitor the progress and the proceedings in respect of Court cases (explanation added in detailed reasons) in which the accused persons had been acquitted or discharged under Section 2 of the NRO, 2007″.
By summer of 2012, the people of Pakistan have lost all hope.
Beneficiaries of NRO whom Supreme Court ordered to be tried under the law are holding key positions. The above referred directions of the Supreme Court seem to have lost their meanings as government of PPP and its allies are not inclined at all to act upon them. The Opposition should forge alliance on this issue and render resignation en bloc if verdict of Supreme Court is not implemented. The Opposition of Pakistan must learn from German and Indian Opposition parties how they forced their governments to be tougher while dealing with tax cheats.
In other countries, including India, corruption is an issue but at least there exists a strong will to fight it.
Recently in India, two drafts of Lokpal Bill were discussed – one prepared by the government and the other, by activists led by Gandhian Anna Hazare. In Pakistan, on the contrary, political stalwarts (sic) are united to defeat the verdict of Supreme Court in NRO case and have passed obnoxious law such as Contempt Act, 2012.
All responsible governments in the world have in recent years shown commitment to retrieve untaxed money but in Pakistan, the government is acting as the main stumbling block to any such move even when binding judgement of the apex Court so requires and is enforceable under Article 189 of the Constitution. Pakistani tax authorities – knowing that there exists a treaty of avoidance of double taxation and exchange of tax information with all the governments where Pakistanis have parked untaxed money – have not yet taken any step to probe into hidden foreign accounts of Pakistanis or sign fresh treaties with them for this purpose as done by India and others.
It is no secret that Pakistani tax evaders have been transferring huge amounts of money to many offshore havens and at other places–in Dubai and Malaysia they invested billions in real estate. In Pakistan, we have no leaders like Ram Jethmalani and Anna Hazare having the will and courage to launch nation-wide campaigns against corruption. Ram Jethmalani and Anna Hazare have done so because their own hands are clean whereas in Pakistan, majority of the leaders cannot justify their tax declaration vis-à-vis standard of living and assets amassed during their public life. One hopes that people like Dr. Mubashir Hasan would come forward and start a nation-wide campaign for this cause.
Filed under: Corruption | Tagged: Asif Ali Zardari, Corruption, India, Pakistan, Pakistani Politics | Leave a Comment »