Corruption: Fallout of Amendments in NAB Ordinance

16 May

By Sajjad Shaukat

After the massive leak of the secret documents from Panama-based law firm Mossack Fonseca, the question of rampant corruption in Pakistan has again come into limelight, as the disclosed papers include the names of several Pakistanis, including the Prime Minister Nawaz Sharif and some other politicians who made millions of dollars of investments in the offshore companies and thus, were involved in tax evasion, fraud, and money laundering.

In this regard, Iceland’s Prime Minister Sigmundar Davio Gunnlaugsson and Ukrainian Prime Minister Arseniy Yatsenyuk resigned in wake of protests and political pressure inside their countries regarding the revelations of the Panama Papers. British Prime Minister David Cameron had faced increasing calls to resign after he admitted that he profited from his father’s offshore trust. Investigations about allegations of corruption have started against several politicians and businessmen in various countries.

As regards Pakistan, differences have arisen between the ruling Party, Pakistan Muslim League-Nawaz (PML-N), the opposition parities like People’s Party (PPP), Pakistan Tehreek-e-Insaf and Jamaat-e-Islami (JI) and including other parties over the adoption of legal mechanism to enquire corruption related to the politicians, after the leak of Panama documents.

Meanwhile, some political parties are also demanding amendments in the National Accountability Bureau (NAB) Ordinance 1999. However, controversy exists between the political parties about the amendments. Therefore, fallout of negative amendments in this ordinance needs special analysis.

It is notable that in April, 2016, some political parties in the Senate, including the PML-N and PPP had jointly demanded amendments in the National Accountability Bureau (NAB) Ordinance.

However, two resolutions by PPP and PTI are being moved in the National Assembly to amend the National Accountability Ordinance 1999. Whereas PTI amendments aim at strengthening the existing ordinance, the PPP desires to limit the ordinance jurisdiction to the federal government only.

If PPP resolution is adopted, it would have several adverse effects, thereby in eliminating corruption in Pakistan.

It will make the entire accountability process dysfunctional. Whatever little deterrent exists against corruption would be lifted.

And provincial accountability mechanisms are likely to be politically aligned, while protecting own party members and supporters who would target the opponents as part of political retaliation.
On the other side, proposed amendments by the PTI for election of chairman NAB, end of plea bargain, abolishing of discretionary powers of the chairman to pardon accused etc. would greatly strengthen the accountability ordinance.

Nevertheless, the Panama files highlighted Pakistan’s national problem of corruption—especially linked to tax evasion and money laundering.

In fact, illicit capital movement is largely due to lax enforcement of capital and trade controls by regulatory bodies, which results into corruption. Hence, Pakistan needs an effective mechanism to control various forms of corruption which have infected almost every sector of the country.

For the purpose, necessary arrangements may be made with other countries through bilateral agreements about prompt sharing of information, concerning private citizens’ bank accounts and trade-related transactions to and from Pakistan.

It is mentionable that the incumbent Federal Finance Minister Mohammad Ishaq Dar had once staggered the National Assembly in 2014 that at least $200 billion of ‘Pakistani money’ was stashed away in Swiss banks. He had also announced that Pakistan was considering ways to utilize new Swiss law ‘The Restitution of illicit Assets Act, 2010’ (RIAA) to obtain information about illegally deposited money in Swiss banks and take steps to get it back. Ironically, no further development has been reported, this also needs to be pursued vigorously.

According to the Federal Board of Revenue (FBR), less than 0.5 per cent of Pakistanis pay income tax. That’s just 750,000 individuals out of a population of some 180 million. Tax revenue in Pakistan, as a proportion of GDP is around nine per cent—compared with 14 per cent for countries with similar per capita incomes. Until Pakistan can raise enough money through tax, it will continue to be excessively dependent on loans and foreign aid. Debt to repay loans now stands at $60 billion. This means that over 60 per cent of Pakistan’s federal revenue is spent simply on paying back interest and debt every year, instead of being spent on vital services, such as education, health and infrastructure.

However, the government needs to do is to keep the rates of taxes low, number of taxes reduced, and the tax net broad-based. As regards, income tax, a far better strategy is to have a flat tax system. And, of course, there should be no exemptions and tax holidays since this is what is used in the interest of the privileged and powerful groups of the society at the cost of other sections of society.

Present system of taxation is not good for the ordinary persons as well as for Pakistan’s international friends who want to trade and not give further aid. As a matter of fact, the problem starts at the top. Owing to avoidance of paying their fair share of taxes by wealthy individuals and elected politicians in Pakistan, the burden is shared by the ordinary citizens. These wealthy people or politicians should pave the way by paying actual amount of taxes, helping to close tax loopholes and encourage others to pay what they owe. Sadly, for now anyway, not all these people are the role models they should be.
Now, enough tax has been raised, but not to fully finance improvements in the quality of life for poor people. Definitely, it cannot be good for Pakistan that the elite can afford luxury cars and foreign trips, but cannot afford to pay their real taxes, while concealing their actual assets.

While, the government is also looking to remove exemptions, simplify the tax collection system and drive out corruption. On the other side, if more persons are paying their taxes, it is essential that they want that their money is being spent effectively on public services such as education, health, governance etc. Therefore, the rulers must secure value for their money, while many people in Pakistan live below the poverty line.

As part of the mechanism to discourage corruption in Pakistan, the government must also ensure transparency in collection of taxes. In this connection, the more open and transparent process will provide less opportunity for malfeasance and abuse.

Nonetheless, the drawbacks and ill-effects of amendments proposed by PPP in the National Accountability Bureau Ordinance 1999 will open the doors of more corruption in the country, while the amendments suggested by the PTI will greatly improve the accountability process.

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