THE business community, wary of political uncertainty and fearful of a possible witch-hunt by investigators chasing undeclared foreign assets, wishes to see a constructive resolution of the problem exemplified by the Panama Papers.

“Investors looking at possible avenues to commit resources in the CPEC-related projects are anxious. For the moment the capital spending decisions have been deferred and monies directed to short-term investment avenues. They want to wait till political clouds clear up. It is damaging. But can they be blamed for it,” asked a business tycoon heading a group of companies.

“People in my circle are worried and in touch with their financial/legal advisers to seek advice on how to protect their assets if debate over hidden wealth tax leads to widening the scope of inquiry against all citizens who own overseas assets,” another executive said.

Whatever way one looks at it, one thing is clear: business sentiments are taking a hit. And issues that need immediate attention and action are being pushed back The problem has to be tackled, the sooner the better.

A possible way out may be a ‘truth and amnesty’ scheme worked out by a parliamentary committee with the help of financial, tax, law and audit experts. In a designated time span the committee should suggest a remedy.The government and the opposition should evolve a common agenda on how to resolve this issue effectively.

The return of capital invested in overseas assets or ventures may not be possible but these can be put on record. Some suggest a tax amnesty scheme to legalise ‘hidden’ overseas holdings..


“Work towards a rational solution of a complex issue that involves updating multiple laws,” says A.F. Ferguson Chairman Syed Shabbar Zaidi


“An initial tax of 2pc on the total declared value of such assets can mobilise resources for public kitty in the short-run and a legal framework for cross-border capital movement can serve the country’s interests in the long-run,” an auditor said.

Business leaders argue this was absolutely necessary to wade through the murky waters of blame game flying in all directions and come out stronger.

“The Panama Papers based politicking has created a lot of confusion and tends to delay decision-making of an already lethargic and business-unfriendly government. The federal and provincial secretariats are becoming a junkyard of files as the future appears unpredictable,” commented a business executive.

Recently a top member of Nawaz Sharif’s kitchen cabinet told Dawn privately, “Come to Islamabad to see for yourself the pressure we are putting up with. The bureaucracy seems to be on a virtual pen down strike. Accuse me of paranoia if you wish but to me it is as clear as day light. A nexus of local and global players is at work. Look at history, every time Pakistan negotiates a difficult turn to hop on a clear road to prosperity something comes up to hold it back,” he insisted, impressing that the economy was to take off when the current controversy surfaced.

If someone looks at political theatrics in assemblies, the mismatch of financial legal structure and the actual cross-border movement of capital taking multiple routes become evident.

In this regard the presentation by an independent lawyer to a Senate standing committee was enlightening.

Mehmood Mandviwalla informed the standing committee that the Protection of Economic Reforms Act 1992 barred authorities from questioning about money transferred via foreign currency accounts till 1999. Then the law was amended providing room for asking some questions, but this had not yet been tested in courts. He pointed out contradictions in the foreign exchange regulation regime.

In the same meeting a SBP official admitted that under the said Act, anyone with a foreign currency account could transfer money abroad via normal banking channels without the central bank’s approval.

Mr Mandviwalla elaborated that the only treaty that could have been of real use was with Organisation for Economic Cooperation and Development that kills all bank secrecy laws but Pakistan was not a signatory to it”, he is reported to have said.

The government, on its part, formed a committee of FBR, SBP and SECP to develop proposals to update financial regulations to plug loopholes in the legal framework.

Independent observers think from the security point of view it was logical for Pakistanis who can afford to move out of the country. That the elite send their children abroad for study is also partially rooted in insecurity.

The occasional release of the data of Dubai property market where Pakistanis are said to be the major players supports their line of argument.

According to the background information, none of the collective business forums have articulated the community’s view or shared it with the government. None of the business leaders were ready to come on record on the subject.

Syed Shabbar Zaidi, Senior Partner and Chairman A.F. Ferguson, advocates:

work towards a rational solution of a complex issue that involves updating multiple laws.

Dr Ishrat Husain, former SBP governor, considers political polarisation over the issue directionless and futile. “People are reluctant to air their views for the fear of becoming controversial in a charged atmosphere”, he said.

Syed Salim Raza supported a measured and mature response to the situation. “Removing inconsistency in the financial legal framework is a tedious job, but it has to be done at some point.

“Instead of moving in circles and mudslinging, the policymakers need to take stock of the reality and quickly settle for an acceptable course of action to revive business confidence for private investment and capital formation that Pakistan desperately needs,” the former SBP chief commented.

Published in Dawn, Business & Finance weekly, March 23rd, 2016

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Afghan turbulence
19 Mar, 2024

Afghan turbulence

RELATIONS between the newly formed government and Afghanistan’s de facto Taliban rulers have begun on an...
In disarray
19 Mar, 2024

In disarray

IT is clear that there is some bad blood within the PTI’s ranks. Ever since the PTI lost a key battle over ...
Festering wound
19 Mar, 2024

Festering wound

PROTESTS unfolded once more in Gwadar, this time against the alleged enforced disappearances of two young men, who...
Defining extremism
Updated 18 Mar, 2024

Defining extremism

Redefining extremism may well be the first step to clamping down on advocacy for Palestine.
Climate in focus
18 Mar, 2024

Climate in focus

IN a welcome order by the Supreme Court, the new government has been tasked with providing a report on actions taken...
Growing rabies concern
18 Mar, 2024

Growing rabies concern

DOG-BITE is an old problem in Pakistan. Amid a surfeit of public health challenges, rabies now seems poised to ...