IT is not surprising that the suo motu hearing begun by the Supreme Court into Pakistanis’ undeclared assets in foreign jurisdictions has led to a cul-de-sac.

Ultimately, inquiries into this matter always end up with the same question: how do we trace these funds? In this case, the court created a 12-member committee to help it address the question; unfortunately, the answer is one which may not make judicial action easy.

The reason is simple. Tracing flows of undocumented wealth into foreign assets is not possible so long as there remains a large undocumented sector of the economy at home. Undocumented assets in foreign jurisdictions are tied in with undocumented assets within the country, because the black economy at home is the nesting ground from where the incomes that flow into these assets originate.

And tackling the black economy within the country is a policy task; it is not one that can be pursued through instructions or even a stricter application of the laws.

It is unlikely that the committee would be able to recommend much that is useful on the issue of shutting down the channels through which undocumented incomes travel. The main reason is that these channels are integral to the conduct of normal trade as well as the normal cross-border flow of capital.

Heightening surveillance or attaching larger penalties to the misuse of these channels will negatively impact investment and trade. So long as practices like benami accounts and assets at home, as well as opaque property markets and multiple tax-evasion techniques persist, using the instruments of law and foreign treaties to create a meaningful dent in the accumulation of foreign assets abroad is unlikely to yield the desired results.

And therein lies the rub. By targeting the accumulation of undeclared foreign assets, the judiciary could find itself outside the remit of the law and firmly in the domain of policy.

At the end of the day, this is a task that requires large-scale documentation of the economy, not just a vigilant eye or even a one-time amnesty scheme. It has to be achieved through creating the right policy incentives to bring the vast mass of business people into the tax net so that their transactions become visible to the state.

And before that can happen, the compact between the state and capital needs to be reformed to lessen the fear and mistrust that most businesses have of the state and its petty officialdom that is tasked with implementing such policies.

The court has done right to order such a study of the myriad pathways through which illicit and ill-gotten gains are being taken out. But the job of putting restraints on this racket will have to await a proper policy response.

Published in Dawn, March 28th, 2018