Pakistan is today plunged into a debt marsh. Its total debts and liabilities as per State Bank of Pakistan, today stand at Rs. 40214.8 billion. The government constituted an inquiry commission in June, 2019, under Section 3 of the Pakistan Commissions of Inquiry Act, 2017 to probe into the loans acquired by the governments during the last ten years. However, no out come of the proceedings of the Commission are yet known to the public. Besides no efforts have so far been made to evolve a long-term policy to retire the said debts and liabilities.

A careful perusal of the last ten years of fiscal budgets reveal that till 2018-19 no serious efforts were made to raise the resources from within the country. Even today, instead of domestic resource / revenue mobilization the financial managers of the country are trying to acquire more and more loans from IMF, World Bank and ABD and some friendly countries. In the process FBR’s revenue targets were raised to about Rs. 5500 billion, to achieve which hit and trial revenue measures are witnessed with the claim in increase in the number of filers of the tax returns, with no details of additional revenue generated from them.

The state of economic governance today gives a very bleak and horrifying picture. The businessmen, apparently seems to have lost confidence in the government. They had to approach the COAS for redressal of the issues and grievances, followed by a meeting with the prime minister with top business brass and presidents of various chambers. The most astonishing episode was the statement of the chairman NAB as of 6th October, 2019, stating that the NAB will not interfere in matters pertaining to taxes and bank defaults. Thereby meaning that the NAB will not register and investigate cases pertaining to tax evasion and bank defaults. Which legal provision of National Accountability Ordinance, 1999 empowers the Chairman NAB to be selective in registering and handling tax evasion and bank default cases may only be known to the NAB itself. Besides Chairman NAB’s statement that he can bring back the looted public money in just fifteen days if given adequate powers is very strange and contradictory to government’s resolve in this regard. Is the statement of the Chairman NAB a mockery or has he tried to put the government to shame that despite all powers, information and tools available to the government it failed to recover a single looted penny? What ever the case, someone owes an answer to the nation that what is happening around.

The prime minister in his speech in the United Nations General Assembly session complained that the developed countries do not help in retrieving the laundered money. The prime minister simply forgot that the predicate offences that generate the black / dirty money is from within our own country. Major amount of that dirty money is generated from tax evasion and other economic crimes, inter alia, including bank defaults, rampant corrupt practices in public sector development projects and organizations. The prime minister is currently silent to this menace nor any governmental measures on this account can be seen.

The earlier chairman NAB is on record having stated in 2013 that the level of corruption in the country is to the tune of Rs. 12000 billion per day. The other institutions have also worked out the cost of corruption to the nation almost at the same level. Evasion of taxes and duties is simply not without the connivance of the corrupt elements in the tax administration. Under the given circumstances and prevailing tax collection system, domestic revenue mobilization will never be possible and the nation will remain hostage with the tax evaders and corrupt tax collectors. The institutions who believe in the status quo and are afraid of the repercussions of curbing tax evasion, would soon realize that unless tax evasion and economic crime is dealt with iron hand the country will not come out of the unmanageable debt marsh and will remain indebted to international organizations and friendly countries. Its economy will remain shattered and tied in the vicious circle of acquiring more loans to repay the earlier ones. Can any country with this negative national balance sheet afford to face a war like situation or undertake a venture to recue Muslims in occupied Kashmir is only a wishful thinking.

The special assistant on finance to the prime minister, Dr. Hafeez A. Shaikh, through his statements before the Senate dated 22nd September, 2010 termed the “elite” of the country as a major hurdle in broadening the tax base and responsible for promoting culture of tax evasion” and again on 4th December, 2010 while addressing the graduates at the annual convocation of the Institute of Business Management he stated that “unjustified distribution of wealth and non-payment of taxes by the elite class are creating economic challenges for the country”. However, Dr. Hafeez A. Shaikh’s silence in 2019 on the issue does not prove that the situation has reversed, on the contrary it has further deteriorated.

There is no foolproof system of checking and controlling tax evasion in the country. The only system available for checking evasion is in the respective tax laws operated by the officers of the same group / service. Officers involved in facilitating tax evasion will never check or control tax evasion under the current built in mechanism of detecting and controlling tax evasion under the respective tax laws. Moreover, since the whole tax collection system is crippled and riddled with corruption no one officer will go against his own colleague in making out tax evasion cases, thus tax evasion goes by default.

Moreover, it is alarming to note that the Section 41 of Anti-Money Laundering Act, 2010 excludes the fiscal offences from the purview of the Act. The “fiscal offence” as defined in the Act “means an offence punishable under the Income Tax Ordinance 2001 (XLIX of 2001), the Federal Excise Act, 2005, the Customs Act, 1969 (IV of 1969) except sections 2(s), 15, 16, 32, 32A and 158 thereof; the Sales Tax Act, 1990 and any other law as the Federal Government may notify in this behalf”. As such fiscal offences are not covered under the Anti-money Laundering Act 2010 and tax evasion is not treated as a predicate offence under the national legislation on anti-money laundering. This facilitates the tax evaders to indulge in all sorts of money laundering activities which go unchecked and undetected. Even the latest amendments passed by the National Assembly on 30th September vide the Anti-Money Laundering (Amendment) Bill, 2019 does not take into account these aspects and lacunas into consideration.

The present government and even the earlier governments launched amnesty schemes brining dirty money / untaxed income into the net on one-time payment of certain percentage. Such schemes did produce tangible results, however, they attracted individuals with ill-gotten money or commodity traders who did not have a long track record of taxation with the tax authorities. It is important to note that no registered taxpayer with an established business concern, involved in tax evasion of both direct and indirect taxes came forward to whiten his black / untaxed money because it is not him alone in the game of evasion, this also equally involves tax collectors and tax consultants. A report by Lahore University of Management sciences reveals that out of each Rs. 100 of potential revenue 38% goes to the government exchequers and 62% is shared between the tax payer, tax collector and tax consultants.

It is time that the major institutions viz. legislators, judiciary and the establishment aggressively address the menace of evasion of taxes and duties so that Pakistan is able to generate all the resources it requires to meet its debts and liabilities and for economic development. Top priority has to be given to check and control tax evasion for which it has become inevitable to (i) constitute a constitutional body to draw a plan and strategy for tax and non-tax domestic revenue mobilization and monitor the same, (ii) development of an independent and a fool proof system of controlling and checking tax evasion, (iii) fresh legislation for making laws to detect, check and control evasion, inter alia, with more punitive actions, (iv) necessary amendments in the NAB Ordinance, 1999, FIA Act and Anti-money Laundering Act 2010 be made to make tax evasion cognizable under the said acts, and (v) incentives / reward policy should be announced for individuals / firms who come forward and help in detecting tax evasion which has now become complex and a sophisticated advanced economic crime and can only be proved through economic measures by reverse cost engineering.

The writer is former Chairman National Tariff Commission and ex-Economic Consultant NAB.

There is no foolproof system of checking and controlling tax evasion in the country. The only system available for checking evasion is in the respective tax laws operated by the officers of the same group / service.