Taxing battles


“All public power is a sacred trust, which is to be exercised fairly, justly, honestly and in accordance with law”. – Supreme Court in Workers’ Party Pakistan & Others v Federation of Pakistan & Others [PLD 2012 Supreme Court 681]

In the wake of references filed by politician against each other for concealing assets and/or tax evasion, the people of Pakistan are further disillusioned about the conduct of their political leaders and elected representatives vis-à-vis discharging tax obligations.

They are shocked to find out that section 5 of the Protection of Economic Reforms Act, 1992 and section 111(4) of Income Tax Ordinance, 2001 are still in operation, protecting money launderers and tax evaders. They ask whether it is it good for the state and for law to have provisions that say that no question can be asked even if illegal and untaxed funds are remitted in Pakistan through banking channels. They are horrified to learn that the majority of elected representatives from all parties have very poor tax records.

Many years back, the Centre for Investigative Reporting in Pakistan (CIRP) in its reports, ‘Taxation by Misrepresentation’ and ‘Representation Without Taxation: CIRP’s Report Unmasked Tax Evasion In Parliament’, exposed how income tax law was violated with impunity by elected representatives. But till today no action is taken by the Federal Board of Revenue or National Accountability Bureau. Quoting CIRP, the ‘Sunday Telegraph’ on May 5, 2013 asked how public officeholders in Pakistan openly defy tax laws and get away with it.

Section 5(m) of the National Accountability Ordinance, 1999 (the law has been effective from 1985) includes in the definition of ‘public officeholders’ all existing, former and incumbent presidents, governors, prime ministers, chairmen and deputy chairmen of Senate, speakers and deputy speakers, federal ministers, ministers of state, advisors, special assistants as well as political secretaries to the prime minister, parliamentary secretaries, members of parliament, and auditors-general.

It also covers anybody who has been an officer or held a post in the service of Pakistan or any service in connection with the affairs of the federation, or of a province, or of a local council or in the management of corporations, banks, financial institutions, firms, concerns, undertakings or any other institution or has been the chairman or vice chairman of a district council, a municipal committee, metropolitan corporation, fall in the category of public officeholders.

The taxation system is one of the fundamental elements of a constitutional democracy. If elected members do not discharge their tax obligations diligently, not only does the entire system get discredited, they also lose the moral right to represent the people.

No taxation without representation is a cardinal principle of democracy – Article 77 of our constitution says that no tax shall be levied for the purposes of the federation except by or under the authority of an act of parliament.

In its recent judgement [Civil Appeals No.1428 to 1436 of 2016], the Supreme Court has held that “neither a secretary, nor a minister and nor the prime minister are the federal government and the exercise, or purported exercise, of a statutory power exercisable by the federal government by any of them, especially, in relation to fiscal matters, is constitutionally invalid and a nullity in the eyes of the law.

“Similarly budgetary expenditure, or discretionary governmental expenditure can only be authorised by the federal government ie the cabinet, and not the prime minister on his own”.

In Muhammad Ahmad Chatta v Iftikhar Ahmad Cheema and others [Civil Appeal No.1020/2014], the Supreme Court, while hearing an appeal under section 67(3) of the Representation of the People Act, 1976, disqualified the elected member for non-disclosure of assets of spouse:

“From the perusal of record, it is established that while submitting the nomination papers, the respondent has not submitted statement regarding assets of his spouse as required under section 12 of the Act, 1976.

“The learned election tribunal, without taking into consideration this aspect of the case and while holding that respondent has not disclosed assets owned by his spouse and the account maintained by him, dismissed the election petition merely on the ground that mens rea is not proved and further the government exchequer has not suffered any loss on account of non-disclosure of these material facts. This finding of the tribunal is against the spirit of [the] law and as such calls for interference.”

It is a universally accepted principle that democracy and rule of law go hand in hand; without transparency and accountability both remain mere clichés. Paying taxes is a constitutional obligation of all citizens, and violation by anyone should be dealt with according to law without any fear or favour for any person, notwithstanding his position in society. If lawmakers commit any lapse in respect of their tax obligations, they must be punished more rigorously than others, as they are supposed to be custodians of public faith and money.

The present legal battle before the Election Commission of Pakistan and filing of references with the speaker of the National Assembly has a silver lining. It has the potential of purging politics from the corrupt, the tax evaders, the beneficiaries of loan write-offs and the plunderers of national wealth – no matter which political party they belong to.

The orders of the Election Commission and ultimately the final decision by the apex court will have far-reaching consequences for strengthening democracy. There is a chance that we will get rid of the influence of money power that has been polluting our polity.

Those not standing up for supremacy of rule of law and showing inaction are party to kleptocracy (in the Pakistani context: ‘corruptocracy’). Through such silence and connivance they are jeopardising the future of their coming generations. History will never forgive these silent spectators.

The writer is an advocate of the Supreme Court and adjunct faculty at LUMS.