KARACHI, July 22: Tax evasion and all other fiscal related crimes are being kept outside the jurisdiction of the Anti-Money Laundering Law that is expected to be promulgated next month.
“We are trying to legislate on kickbacks, out of books transactions, bribes and a host of other forms of corruption,” a senior official of the National Accountability Bureau (NAB) informed a gathering of lawyers, representatives of NGOs, bankers, journalists and business leaders on Saturday in Islamabad. But he was more than clear that tax evasion and fiscal related crimes are being kept outside the jurisdiction of the proposed anti-money laundering law.
He said that a re-structured and reformed Central Board of Revenue (CBR) will look after the tax evasion and all the fiscal related crimes.
The occasion was a two-day workshop on Friday and Saturday in Islamabad organized by the NAB to frame an anti-corruption strategy. Inaugurated by President General Pervez Musharraf on Friday, the workshop was spread over several sessions.
One of these sessions, on Saturday afternoon, was devoted to money laundering, in which a lawyer Muneer A Malik, who is involved in anti-money laundering drive on international level, mentioned tax free trade and export zones, particularly those in the UAE, as safe haven and conduits for whitening of the ill gotten money.
FATA within Pakistan, where no one dares to demand compliance with fiscal laws, collect utility bills and enforce government’s writ, is mentioned as other source of generation of black money and is an avenue of money laundering.
But fragile economy of Pakistan is being mentioned as the key factor to keep the tax evasion, fiscal related crimes and issue of tax free zones outside the jurisdiction of the proposed anti-money laundering law.
Promulgation of anti-money laundering law is part of a corruption combating strategy that the NAB has almost finalized in consultation with 2,500 individuals who according to a preliminary report, include “ministers and senior bureaucrats to slum dwellers.” The NAB organized seven workshops to finalize this strategy. The last workshop on this issue was a two-day affair on Friday and Saturday in Islamabad spread over several working sessions.
The two officers of NAB who attended Saturday meeting are members of a Working Group on money laundering formed by the federal government. This group’s functions include to identify loopholes in the financial sector to curb money laundering. The group is also expected to frame regulations premised on internationally acceptable precedents for detecting suspect transactions.
One of the two NAB officers said the proposed anti-money laundering law will have statute status and supersede all related laws enforced in the country so far. Both the officers remained non-committal to repeatedly asked question whether the government will circulate the draft of the proposed law for eliciting public views.
“We have already with us the views and input from the banks and financial institutions,” one of the two NAB officers replied. He said all the law enforcing agencies will have to conform their working and operations according to the requirements of the new law.
Business leaders including Tariq Sayeed, a former President of the Federation of Pakistan Chambers of Commerce and Industry made a forceful plea to differentiate between the officially declared tax free trade and export zones and areas like FATA.
Muneer Malik estimated an annual financial haemorrhage of 20 per cent of the budget. He quoted a World Bank survey, which disclosed that Pakistan government was losing roughly Rs300 billion every year to corrupt practices.
The report of the Task Force on Reform of Tax Administration in Pakistan, released last April, quantifies Rs200 billion annual loss only in revenue that pertains to income and sales taxes and in customs. Bulk of this amount—more than Rs100 billion—is kept by the tax payer. The tax collector gets a share of Rs55 billion while tax consultants get roughly Rs30 to Rs35 billion for their services.
The World Bank estimated a loss of over 5 billion dollars due to smuggling only in 1992-93. A few research scholars estimated revenue loss of Rs40-45 billion in 1989-90, which went up to Rs104 billion in 1995-96.
Pakistan remains one of those countries where government had never addressed the issue of whitening of black money. Instead, the government offered all opportunities for whitening the black money. “No question asked” was the luring condition for inviting investors during the decade of eighties and in early nineties. Late Dr Mahbub-ul- Haq during martial law regime of Ziaul Haq came out with his novel scheme of whitener bonds in 1984. Nationalized banks were made to pay loans for whitener bonds bought by the holders of black money. Then there was an unending series of bearer bonds and prize bonds for the holders of black money. Finally it was during 1992-93 when foreign currency bearer bonds were launched. Pakistani banks were raided in New York and their operations remained suspended for quite a few days.
With an indicated amount of 5 to 6 billion dollars a year, the remittance amount from expatriate Pakistan led to proliferation of thriving money changing business in Pakistan. Hardly a billion dollars came through banking channels and the remaining amount routed through money changers.
In April this year a team of US experts visited Pakistan and held a series of meetings with the money changers and officials. The September 11 attack on twin world towers in New York and Washington was carried out with an investment of half a million dollars. All this money was routed from the traditional hundi and hawala channels and reached the US.