Creating companies offshore is not criminal

Published: April 25, 2016


ISLAMABAD: Remember WikiLeaks? Some of the documents were about Pakistani politicians and establishment. Nothing transpired because the hurt was not limited to politicians.

The Panama Papers, on the other hand, has singled out politicians so far. This has had several effects.

One, if the gates of investigations are opened wide, then those outside political circles will be targeted as well.

Capital flight from Pakistan a regular occurrence

Two, allegations are being hurled as to how the money involved in the creation of these offshore companies was stolen from the national exchequer or was illegally acquired and that this money was transferred abroad by illegal channels. Neither of these charges have been confirmed or denied in the Panama Papers.

The charges of having illegally acquired the money or having somehow stolen it have neither been asserted in the Panama Papers nor are they being investigated by any reputed agency.

Also, whether the entire sum to finance the off-shore companies had been redirected from Pakistan is not yet known. It might be the case that the money came from some other country as well.

Another factor to bear in mind is that for the past four decades the situation in Pakistan has been such that many investors either transferred their money out of Pakistan or hesitated to bring their money into Pakistan. Part of it may have gone into financing the offshore companies.

Upon reading the Panama Papers, one realises that these neither assert that the creation of offshore companies is illegal, nor that it goes against ethical norms. They just report who owns what companies. Whether such reporting could harm these individual is not the concern of these reporters.

Pakistan is one of the countries where these papers have caused immense political upheaval.

Two questions are being asked in Pakistan on the impact: Can the owners of these companies be punished for illegal earning and transfer of money? Can the money involved be brought back to Pakistan?

Panama Paper leaks: Will resign if proven guilty of wrongdoing, says PM

Finding out answers to these two questions does not need rocket science. Only credible investigation can determine whether it was stolen money and transferred from Pakistan by illegal channels.

Not all revelations and investigations help nations retrieve the money lost to thieves and gangsters; not all charges framed on the grounds of theft and use of illegal channels help nations monetarily or help correct the political-economic structure. Many such charges are driven by political propaganda.

Now, let us focus exclusively on the charges framed against the Nawaz Sharif’s family.

In his address to the nation after the Panama Papers were out, the prime minister argued that his family was intimidated and businesses were harmed by exile. And that he and his family had no option but to establish new businesses that were out of the reach of the military regime.

His opponents might not be satisfied with that argument but he is not the only one in Pakistan to complain of intimidation. The investment climate and the political upheavals have been harming the investment culture in Pakistan regularly. The state and the judiciary have been unable to do anything about it.

Imran insists on CJP-led probe into Panama documents

Even the non-political business houses have been regularly complaining of anti-business regimes, bureaucracy, judiciary and extortionist gangs.

The country’s biggest export houses in the textile sector continue to argue that they have been forced to take their investments out of Pakistan.

Creating offshore companies therefore is not the basic issue. The basic issue is a fair investigation.

The writer has worked with major newspapers and specialises in analysis of public finance and geo-economics of terrorism

Published in The Express Tribune, April 25th,  2016.

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Reader Comments (37)

  • Apr 25, 2016 - 9:41AM

    Dear writer, we all know creating offshore companies is not illegal. People want to know what were the sources and channels used for the transfer of these funds. Here we are not talking about a businessman, we are talking about the PM. One other thing, these companies were formed well before Musharraf dethroned Nawaz Sharif.Recommend

  • Humza
    Apr 25, 2016 - 10:13AM

    @Shahid: If these companies were formed before Musharraf and we all know that overseas accounts for businessmen are legal, why all the big fuss? Let the commission decide whether the money was made from business or looted which should settle the matter. Off shore accounts are legal which is why British PM Cameron is not resigning but Pakistan too should decide whether the practice should be stopped in the future.Recommend

  • Haji Atiya
    Apr 25, 2016 - 10:18AM

    Depends; if it’s being used for tax evasion, money laundering, tax avoidance, asset protection purposes, etc..a forensic audit could establish the motivation/ intention by identifying the channels and sources used for the transfer of funds.Recommend

  • Saleem
    Apr 25, 2016 - 10:53AM

    The main question is around the source of the funds. What kind of investments can lead to asset growth at such high rates ? The writer is trying to sideline the main issue and probably looking to get the job of Parvez Rasheed. A bigger question is of ethics. When you have burdened the population under so much taxation then how come you are keeping your assets out of tax net and ruling over the country demanding more tax ? Recommend

  • Matti Pao
    Apr 25, 2016 - 10:58AM

    If offshore accounts are not illegal, then why Panama leaks are termed as ‘leaks’, and why several top politicians around the world had to resign? My dear, most of it is looted money, and a reason for embarrassment for anyone involved, no matter whether through white collar crimes, or otherwise!Recommend

  • KIpling
    Apr 25, 2016 - 11:01AM

    Offshore stocking of money means to keep the money out of your home country. Why?
    Simply because the money is not Halal. And when a Prime Minister (leader of the nation) does this through (his siblings off course), then it is the worst type of crime committed. Recommend

  • Atheist_Pakistani
    Apr 25, 2016 - 11:38AM

    If these were used to Tax evasion, he should be criminally prosecuted. End of story.Recommend

  • Unknown
    Apr 25, 2016 - 12:39PM

    The Sarkar of Raiwand does not invest his own money in Pakistan and fool the nation by saying we are bringing foreign investment in the country Recommend

  • Parvez
    Apr 25, 2016 - 1:03PM

    It may not be criminal but it certainly is not moral……..and our Constitution says that our leaders are expected to be morally upright ( sadiq aur amin – truthful and honest )Recommend

  • JAM
    Apr 25, 2016 - 1:39PM

    Eating a cake is not criminal but eating a cake from snatched money is criminal..Recommend

  • Apr 25, 2016 - 3:16PM

    the issue is not big, it is only politically motivated drive to earn popularity by Imran Khan who have nothing to do instead of staging dance based protests promoting vulgarity. Recommend

  • Apr 25, 2016 - 3:18PM

    Imran Khan have nothing to do with it. he should focus on his mental healthRecommend

  • London Banker
    Apr 25, 2016 - 3:32PM

    Frankly getting tired of the ‘apologists’ amongst Pakistan’s ‘educated’. It is sickening. Recommend

  • Phobias
    Apr 25, 2016 - 3:39PM

    Any speculative accusation is unjust. NS had big money even before he entered politics. He made more money buying scrap from Afghans of the machinery and stuff left by the Soviets during 1980-1988.
    He knows business and how to multiply assets through investments and business. It is possible that money was transferred by creating off shore companies legally. Also, it is possible that some money was gifted by the Saudis during his exile, which he invested abroad, albeit under the names of his son.
    Nationalization of the 1970’s broke the back of the investors who disinvested to reinvest abroad. And, since then no investment is safe in the country and naturally investors want to transfer some of their (investment) eggs abroad rather than keep all of them in the home basket.
    The crux of the matter is investigation must take place and the sources of income must be determined. And, if tax evasion is proved, punishment must be given as per law.
    However, in the meantime, speculative accusations must stop and the government must not be distracted from development work. Recommend

  • Abrar
    Apr 25, 2016 - 4:07PM

    Bravo. Mr Hoti has the habit of offering something new every time he writes. Off course the issue is not offshore companies; it is the money using which thees companies are created. Keep it up Mr HotiRecommend

  • Ayesha
    Apr 25, 2016 - 4:13PM

    True, all investments offshore do not mean transfer of ill-gotten money by illegal channels. But the main issue the writer sounds to raise is: our military governments intimidate people to keep their money abroad. Our bureaucracy does not allow an investment-friendly environment. Iran Khan should come to senses and realize that his UMPIRE has committed crimes in Pakistan. He should not defend the UMPIRE but those who were intimidated by the Umpire.Recommend

  • JAM
    Apr 25, 2016 - 4:14PM

    sharif family is not only investors but also ruler of the nation. they have all powers to create safe environment for investors. legally they may be correct but ethically, being ruler they are wrong doers.Recommend

  • Gulab
    Apr 25, 2016 - 4:26PM

    Yes, it is not a crime. And fair probe might reveal what actually happened. But Mr Hoti, do you expect a fair probe? What if the faujis tell the commission to just hook the ones they want to torment? It was the Establishment that intimidated politicians. How can they allow a fair probe?Recommend

  • And
    Apr 25, 2016 - 4:30PM

    Not only the nationalization of the 1970’s drove investors abroad but also the Bhatta-khor caused investment capital to flee abroad, especially since 1986.
    The feudalists in the 1970’s feared an industrial capitalism might uproot their feudal power base. Later during BB’s and Zardari’s government, the outlook of the government was to use foreign companies for investment needs in Pakistan, especially in the power generation sector, while maintaining feudal power and control of politics.
    Thus industrial capitalism which is the engine of growth of modern times remained stunted and investors, such as, PM, among others needed to also invest abroad.Recommend

  • Sodomite
    Apr 25, 2016 - 5:18PM


    The only difference here is that our PM and his family own the most expensive Real Estate in the world. David Cameron does not. Do you not find it odd that Arabs are the most heavily invested in UK property, whereas all Arab nations life quality index rank at the bottom?? Does that tell you anything of why they are hiding their assets from their own people??Recommend

  • Jawad U Rahman
    Apr 25, 2016 - 5:27PM

    Creating companies offshore is not illegal, but using your 10 and 12 year old kids’ names to hide money offshore to avoid declaring it locally in Pakistan is illegal, immoral, and unethical – more so if you are the Prime Minister of the country.Recommend

  • Shakil Ahmed
    Apr 25, 2016 - 5:48PM

    Sharifs didnt want to declare the source of money and their name, so they registered an offshore company in British Virgin Island, and use this to buy property in UK, in a fair deal would have directly buy property in UK by transferring money straight from Pakistani bank accounts!
    Sharifs are dodging Pakistan as well as UK tax authorities.Recommend

  • Rex Minor
    Apr 25, 2016 - 6:14PM

    Creating offshore companies therefore is not the basic issue. The basic issue is a fair investigation.

    Not so fast Mr Ikram Hoti with your conclusions without having understood the phenomina of creating offshore companies in Panama? The Sharifs have not opened an offshore company but an account for few dollars with a company name which does not exist other than to receive and transfer money to other accounts in the world. This is called money laundering by those who want secrecy and protection from law in their own country. This act is illegitimate and considered unlawful in all world democracies. Those who exercise political authority in thei country are required to immediately resign from their office or submit in the parliament giving full account of the transactions..

    Rex Minor Recommend

  • Awais
    Apr 25, 2016 - 7:27PM

    Here we go again Patwari without having any idea of either off shore companies rather should be called off shore shell companies or jurisdiction where such entities exist and operate, with no clue how money laundering is done on the top I can bet 99.99% of these guys wont even know whats the origination of word laundering, but will blindly trust their beloved leaders for fair establishment and result of commission…. Recommend

  • Molana Diesel
    Apr 25, 2016 - 7:51PM

    Totally agreed dear. But NS has ruled for more than 30 the years. Now the money should come back to Pakistan.Recommend

  • RA
    Apr 25, 2016 - 9:48PM

    This article is a whitewash job. I wonder if someone paid the author to write it. Of course it is not illegal to create offshore companies. However, it is illegal to use them to dodge taxes or hide illegally acquired income. It is very vague when the writer says “The basic issue is a fair investigation”. A fair investigation of what? No the basic issue is whether these offshore corporations were used to hide illegally acquired income, simple.Recommend

  • Faisal Afzal
    Apr 25, 2016 - 10:15PM

    Why would PM ever create a commission to send him to jail? How can anyone rule on their own crimes?Recommend

  • Assad
    Apr 25, 2016 - 10:33PM

    Have offshore accounts by all means, however clearly show that you have paid taxes on the money earned in the country where the money was earned. If they are using these accounts as tax shelters then that is problematic and all the more because as leaders of a nation where less than 3% pay taxes, its outright shameful for them to not pay taxes and hide their money.Recommend

  • Shah
    Apr 25, 2016 - 10:51PM

    Big Fuss is that money transferred out thru Hundi and Havala system is illegal.. If regular bank transfer was made then produce tax paid on the money transfered. That is the main issue.. How the money was earned in Pakistan and tax paid on transferred amount.. Once done. matter is then closed.Recommend

  • Apr 25, 2016 - 10:54PM

    all these businesses have made more than 1000 times of their original investments,Pakistan is heavly tax derpived country if a factory worker or the office clerk pays his taxes the business should pay their taxes as well,our rupee is continually depreciating and waht we are now seeing in Panama is only the tip of the iceberg.At the root of all this financial deep mining is the fact that if Pakistan has helped them achieve what they are today they must give back to Pakistan what is fairly Pakistan’s share.The intentions behind setting up an off shore company is tax evasion and money laundering,these companies can not be Kosher,graveyards are full of billioners who have disgraced teir lives and billions,let Alex the great should be our teacher,Pakistan get help of the uno,world bank and imf and ifc and strip these politicians or whatever their colors are and pay theri taxes.Recommend

  • Xenia
    Apr 26, 2016 - 12:22AM

    Issue is not investing money abroad rather to make sure that tax is paid for money earned in Pakistan, whether plundered from public exchequer and whether money has been legally transferred or other Way round.
    This article is not more than Lafafa Journalism. Recommend

  • Arslan
    Apr 26, 2016 - 1:38AM

    The crucial question in Pakistan is whether the nation wants to stop this business of patronage. Whether in trading, manufacturing or law enforcement, there is a nexus of powerful people within the bureaucracy, judiciary, political class, media and other power centers who band together and discredit anybody who finds fault with their collusion. They are particularly vicious to their own members who do not dip into this illegal wealth collection and abuse of power.

    Somebody needs to stop this charade and if the established power brokers do not want to interrupt this lucrative arrangement, maybe its time people turn to defending their rights themselves and recreate power centers.Recommend

  • freed
    Apr 26, 2016 - 1:56AM

    Nothing is crimnal when it comes to ruling elites. They are the most honest people on planet. Ziradri/nawaz are known all over the world for their honesty and integrity. We are blessed to have such great honest people walk among us. They are doing this public service only to benefit corrupt awam. Recommend

  • sophee
    Apr 26, 2016 - 2:04AM

    How do you know when you are in pakistan? Open the paper and read things like these. There is nothing wrong with not declaring assets and opening offshore companies in tax haven countries and deny the existence of it for years. Has nawaz ever declared these companues before? Why not? Must have slipped his mind since he has so many more he has not declared yet. Recommend

  • Apr 26, 2016 - 5:14AM

    It cost Nawaz Sharif 10% of his asset.Recommend

  • Compatriot
    Apr 26, 2016 - 6:25AM

    Businessman is bound to think of his interests in business. He can not think for overall interests in the country or the people. Recommend

  • Mah Rukh
    May 18, 2016 - 5:39PM

    If we keep in mind the concept of welfare state then how these offshore companies undermine democracy and weaken the nation state?Recommend

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