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NON-FICTION: DECODING THE FINANCIALS

November 04, 2018

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"Pakistan has a substantial number of rich people — seven to eight percent of the total population — whose real capita income may exceed even the highest averages in some of the richest societies in the world,” writes Syed Shabbar Zaidi in his book Rich People, Poor Country: The Story of Fiscal and Foreign Exchange Policies of Pakistan. The book is a collection of his articles published in the daily Business Recorder during the last two years. In it, Zaidi has attempted to highlight important developments in Pakistan’s economic system by providing his opinion and commentary with relevant historical context of the laws and any changes made to them.

Zaidi was president of the Institute of Chartered Accountants of Pakistan and the South Asian Federation of Accountants in 2006 and 2008 respectively. He also served as a caretaker provincial minister of Sindh for finance, revenue and excise and taxation during 2013. He currently heads Pakistan’s oldest firm of chartered accountants, A.F. Ferguson & Co., which is a member of the PricewaterhouseCoopers network. His appointments thus provide him with a unique vantage point to comment on Pakistan’s policy matters.

The articles in Zaidi’s book examine changes in Pakistan’s legal framework with respect to rules governing foreign currency accounts, offshore income and assets and the art and science of hawala transactions — an alternative, informal system of trust-based banking that allows transfer of funds without their actual physical move — amongst other subjects. The author’s commentaries are aimed at identifying key policy matters governing fiscal strategy, corporate regulations and foreign exchange regimes and translating them into a language fit for general understanding.

Shabbar Zaidi’s compilation of articles provides insight into the problems of Pakistan’s fiscal and forex policies

In the chapter titled ‘The Art and Science of Hawala Transactions’, for example, the author explains the nature of such exchanges by providing a detailed framework of how these transactions occur between the parties involved. He deciphers the system thoroughly, identifying the main hurdles faced by South Asian countries and notes the laws in place to deal with these transactions effectively. Hawala — an Arabic word denoting ‘trust’ or ‘exchange’ — continues to remain in vogue in the subcontinent despite the government’s efforts to crack down on the operators of these systems. In listing the underlying causes for these transactions, the author attributes better parity rates offered by dealers, lack of legal restrictions and the availability of funds as the primary reasons for the flourishing of these informal money transfer systems.

Furthermore, his comparative analysis on the laws governing disclosure of assets in Pakistan is not only apt, but traces the development of the laws that mandate the country’s population to disclose their assets. In ‘What Constitutes Disclosure of Assets?’, the author points out that disclosure of assets is found only in Pakistan, whereas no such statement of wealth is found in India, the United Kingdom or the United States. Thereafter, he looks at the relationship between the wealth statement and the Income Tax Ordinance; here he highlights the limitations faced by the state to ascertain the truthfulness of any disclosures under the statement. Zaidi also traces the evolution of the statement’s utility since its inception, which was in the first place to determine whether taxes filed are in line with assets owned by a given individual. However, he goes on to add that this purpose has reversed entirely. Since the authorities seek statements from individuals who are already paying their taxes, those who do not pay them are allowed to roam free without any government intervention. In his conclusion, he questions the purpose of such cumbersome filings when they fail to serve the objective set out for them.

Pakistan’s economic stability has come into question time and again throughout its history. In his article titled ‘Financial Instability’, originally published on Nov 6, 2017, the author attempts to explain the problem through the lens of money laundering. He highlights that previous governments struggled to ensure anti-money laundering steps were taken, but in the post-Panama scenario, the situation has escalated drastically. Zaidi writes that “after the said leaks, the term ‘money-laundering’ is being applied to every financial crime, every case of tax evasion, every transfer of funds from Pakistan without appropriate knowledge and comprehension of law.”

The writer censures the failure of recent governments to carry out consistent policy-making to help uproot the economic problems of the country. He advises the government to distinguish between documented and non-documented sectors, provide clarity on tax-related matters and stop the abuse of state funds.

Zaidi’s professional experience imparts him an ability to comprehend tax policies in Pakistan in their practical setting. In his articles, he attempts to review measures, laws and their applications by explaining the changes in the economy within their contextual background and by highlighting the laws governing these changes.

However, readers may find the book’s structure and composition to be disorienting. The text, content and arrangement of the articles are incongruous and the author’s conclusions in some of his articles seem too far-fetched. Nevertheless, for students, teachers and those who are keen to learn about tax-related changes in the last two years, the book offers adequate knowledge.

The reviewer is a member of staff

Rich People, Poor Country: The Story
of Fiscal and Foreign Exchange
Policies of Pakistan
By Syed Shabbar Zaidi
The House, Pakistan
263pp.

Published in Dawn, Books & Authors, November 4th, 2018

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