Follow the money
EVER since the Panama Papers were exposed, many voices advocating accountability have surfaced on electronic, print and social media. Time and again, the higher courts have reprimanded the accountability machinery for its inaction, and the prevailing accountability laws have been subjected to vitriolic criticism for their controversial provisions.
By declaring corruption a provincial subject, the Sindh Assembly recently repealed the National Accountability Ordinance, 1999. For all practical purposes, does this not mean that NAB has become defunct in Sindh? Provincial anti-corruption departments have limitations in exercising their respective jurisdictions, and the existing framework of accountability laws does not cater for thorough accountability, especially for financial crimes.
The concept of a welfare state is built upon a vibrant revenue collection mechanism. Taxing citizens is one of the core functions of the state. Article 7 of the Constitution defines the ‘state’ as the government or the authority “by law empowered to impose any tax or cess”. The very definition revolves around the functionality of an authority that is responsible for exercising the power of taxation.
Tax evaders rarely make the headlines.
Among federal laws, the Income Tax Ordinance, 2001 (ITO) is the most comprehensive. A public office holder, being salaried, remains in the domain of tax jurisprudence. Having taxable incomes from salaries or other sources, he or she is under a statutory obligation to file an income tax return. Non-filing may result in the imposition of a penalty. Likewise, in almost every public-sector organisation, a record of assets and liabilities of its employees is maintained. Some institutions — like the Lahore High Court, Benazir Income Support Programme, ECP, FBR, etc — have ensured submission of asset declarations (even return filings) of its employees and other stakeholders.
The FBR has taken a positive step towards transparency and accountability with the latest parliamentarians tax directory, published for the fourth consecutive year. Essentially, it’s a who’s who and what’s what of income tax paid by the honourable members of the national parliament and provincial assemblies. Every public-sector organisation must publish similar directories of their employees or other subjects under their administrative control or jurisdiction.
Ultimately, all institutions engaged in the process of accountability have to turn to the income tax returns of the accused. Presently, under the income tax law, the order for assessment is deemed to have been passed when a declaration of income and assets is filed. Presumption of the truth is attached with this declaration unless it is subjected to an audit, through which this self-assessment of a person’s income may also be amended on the basis of ‘definite information’ received by the department.
In cases where the money trail is not provided, or the lifestyle of an individual does not match that of the declared means of income, provisions in the ITO — entering and searching premises and calling for information from any person — become powerful tools in the hands of the tax machinery in order to investigate such practices and make such individuals accountable.
If someone conceals their income or furnishes inaccurate particulars they may be prosecuted for the offence, punishable with imprisonment up to two years, or with fine, or both. Moreover, concepts like foreign sources of income, resident and non-resident persons, etc also act as a stringent control against tax evaders internationally. In general, the enforcement of returns and wealth statements of public office holders with a salary or any other source of income is an inclusive task in the administration of tax law.
Pakistan became a signatory to the Organisation for Economic Cooperation and Development last year, which was a step in right direction. The formulation of an anti-money laundering agency in the FBR’s Inland Revenue wing is a silver lining in the accountability process through taxation. Likewise, bilateral tax treaties also serve as an effective tool for further scrutiny in such cases.
Perhaps due to the absence of an evolved tax culture, tax evaders rarely make headlines in this land of the pure. If the person under investigation is a public functionary, he or she may be held accountable through the tax law more effectively. It would be a useful alternative even in cases where the accountability law has been omitted or its wings clipped by provincial enactments. The framework provided by tax laws is more effective and efficient in cases of scrutiny for accretion in assets of public office holders, as there is no plea bargain contained therein. It is the need of the hour to prioritise and implement Pakistan’s income tax law framework in letter and spirit.
The writer is a civil servant and former judge.
Twitter: @RashidJavedRana
Published in Dawn, August 10th, 2017