View from US: History’s most notorious tax evader

Published May 8, 2016
Al Capone’s Miami mansion
Al Capone’s Miami mansion

The money trail may have gone cold. But here’s the smoking gun: the recent dash of the prime minister to London on the pretext of getting his heart checked; then venturing out to perhaps dump some of his stashed away wealth to balance the books, at luxury stores where billionaires shop. Tax evasion is a crime that gets most crooks nailed and thrown into the clinker. The best foot forward then, for the judicial commission probing Panama, is to zero in on the tax evasion by 200 odd Pakistanis, including the three children of Nawaz Sharif. Obviously, their millions suddenly didn’t grow wings to fly off and land in offshore accounts. Nor did their money breed on trees. It must have arrived from somewhere; it must have its source of earning somewhere. Did it arrive in foreign banks from Pakistan? Was it ‘earned’ in Pakistan?

“Capitalism is the legitimate racket of the ruling class,” said a man who believed that money made by the ruling class through ill-legal means was just fine. It was their birthright. After all, the ruling classes were above the law, said Al Capone, one of the most infamous American gangsters, the don of the Chicago mafia, in the 1930s, during the Prohibition era. A cold blooded killer and a bootlegger, who stockpiled a personal fortune touching $100 million at that time, Al Capone always managed to slip out of the law enforcement net. Until one day, when the government tracked down his documented earnings. He was found to have evaded paying taxes on his ill-gotten wealth. Boom! Capone was convicted and sent to Alcatraz Prison in 1934 on tax evasion charges. Alcatraz Island was a maximum high-security federal prison just off the coast of San Francisco, California.

Who was Al Capone and how did he make a fortune? A child from an Italian immigrant family from Naples, his father, Gabriele, was a barber. The family lived in a tough neighbourhood of Brooklyn in New York. Despite having been a promising student, Capone was expelled at the age of 14 for hitting a female teacher. He never did go back to school again. Biography.com details his criminal activities with intimate details of the life and times of this tax evader. After Prohibition was enacted, banning alcohol, Capone’s business empire flourished. In 1925, he became the “crime czar of Chicago, running gambling, prostitution and bootlegging rackets, and expanding his territories by the gunning down of rivals and rival gangs.”


The judicial commission must zero in on tax evasion by 200 Pakistanis, including the three children of Nawaz Sharif. Obviously, their millions didn’t suddenly grow wings to fly off and land in offshore accounts. Were they ‘earned’ in, and sent, from Pakistan?


So how was Capone finally trapped? Here’s the punch line: The accountants in the tax department, known as the IRS (Internal Revenue Service), performed due diligence to comb through Capone’s earnings over the years. The IRS in America is relatively free of government interference, even though its commissioner is nominated by the president and confirmed by the Senate. In May 1927, the US Supreme Court ruled that a bootlegger had to pay income tax on his illegal bootlegging business. “With such a ruling, it wasn’t long before the small Special Intelligence Unit of the IRS under Commissioner Elmer Irey was able to go after Al Capone,” we are told by the biography website. Meanwhile, Capone moved with his wife and son to Miami, splurging on a property worth millions to live in.

Thus far, Capone had managed to escape the tax department’s grip around him because all his business dealings were in hard cash that had no trail — except the multi-million dollar Miami mansion that he bought. The price was documented in government records thus prompting the IRS to move swiftly with this invaluable piece of information, as proof of Capone’s declared income on which he had paid no tax. The grand jury indicted Capone on 22 counts of tax evasion, totaling over $200,000. He was sentenced to 11 years in prison.

Here’s a tip for the judicial commission probing Sharif’s offshore accounts: Raiwind Palace — built in 17 months in 1997. How much did the Sharifs pay for the sprawling acreage and building? Based on that magic figure, how much tax was paid by the family? Here’s another perfectly legitimate question for Pakistanis to ask: Why has our revenue collecting machinery, known as the FBR (Federal Bureau of Revenue), failed hopelessly to catch tax evaders’ past and present? FBR has a history of harvesting corrupt practices that the chairman, an appointee of the government of the day, is helpless to remedy. Those like the late Moeen Khan, who tried to clean the FBR, got kicked out by the rulers of the day. In Moeen’s case, it was Nawaz Sharif in his second term as prime minister who sacked Moeen for an operation against the shopkeepers in Lahore’s Liberty Market for non-payment of sales tax. The PM got a call from his brother, Punjab’s chief minister Shahbaz Sharif, to ask the FBR chairman to back off. Later, Moeen was fired.

Here’s one more first-person account from a reliable source: allegedly, years ago tells me that years ago, the excise people at Lahore’s dry port stopped trucks smuggling imported iron slabs that were declared as “iron scrap”. The trucks were bound for Ittefaq Foundry. Someone from the chief minister’s house phoned my source with orders, “Tell your inspectors at the chungi to allow the trucks to pass.” My source had to comply or else get sacked. Tax evasion, that’s what it was; robbing the national exchequer of millions of rupees, while smuggling imported iron slabs and declaring it as iron scrap to pay minimal tax!

Fast forward to 2016: Will the FBR have the courage to confront the sons and daughter of a sitting prime minister for tax evasion? According to press reports, FBR Chairman Nisar Muhammad Khan and his team have devised a “strategy” to dig out the tax records of 200 individuals who own offshore companies, after being told by the National Assembly’s Standing Committee on Finance and Revenue. But the FBR cannot move until its controller-in-chief, Finance Minister Ishaq Dar, gives the green signal to proceed against the 200 tax evaders in accordance with disclosures made through the Panama leaks.

Not in a million years will Dar allow his boss’s three children to be exposed!

Published in Dawn, Sunday Magazine, May 8th, 2016

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