Panama Papers scandal: Speculation mars environment before court ruling

Regular income-profiling will stop people from dodging tax net

ISLAMABAD: As the Supreme Court of Pakistan took up for hearing the Panama Papers scandal before the ruling and opposition parties arrived at a consensus on the terms of reference of a judicial probe commission, speculation started polluting the air even further.

While some commentators say that actual facts behind the use of black money for setting up offshore companies will be known to the people of Pakistan through court hearings, others think the proceedings will help all the accused to evade the fate they might have met through some other process.



These are only speculations and assessments based on over-enthusiasm or, conversely, pessimism induced by the legal history of Pakistan.

Let’s not indulge in this game and go straight to the basic issue – the stashing of black money.

If the court is assisted properly in developing a view of what kind of black money is used in creating offshore companies, in politics and in expanding businesses in Pakistan, the judges will be able to ask about the legality of assets of the accused, their money trail to the establishment of offshore companies, and, in some cases, the emergence of business empires or their rise in the political sphere given the extravagant use of money in organising public rallies and horse-trading.

While talking about black money, people should be aware that making and using it for building business empires, developing political careers or creating offshore companies needs special skills and connections in the right place.

The Supreme Court is the perfect body that can find out lacunae in the law and connivance (or incapacity) in the bureaucratic structure used by the accused.



Naturally, the first question the court may ask will be: how did you amass the money to create the business empire and offshore companies. However, before that the court must satisfy itself that the allegations made have some substance.

Those who have brought the case must be smart enough to prove that the investment made in offshore companies was undeclared and black money. If the setting up of offshore companies cannot be proved, no question will be asked about the alleged black money and its transfer to tax havens abroad.

Actual beneficiaries

The ideal course will be to first establish that the accused are actual owners or beneficiaries of the offshore companies. Then the money trail should be traced. But the process should not stop here if the intention is to kill the mother of actual crime – stashing black money to build business and political empires and take it abroad.

As far as I see, heaps of black money cannot be pocketed without lacunae in the law and the connivance of bureaucracy. All over the world, tax officials know about taxpayer profiling. No user of money in business and politics can escape the tax net if his income-profiling is regularly conducted.

In countries like Pakistan, the schemes for legalising the undeclared income turn out to be an incentive to collect data for the income-profiling of people in business and politics. However, the efforts go down the drain in the absence of regular profiling as the holders of black money are able to influence the bureaucracy.

The court, while hearing the case, could seek the income profile of the people falling in the high-income group. This way it may find out how black money is stashed overseas.

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

Published in The Express Tribune, November 14^th, 2016.

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