And between tax avoidance and tax evasion
The Panama Leaks have jolted most parts of the world; evidently Pakistan is no exception. The 11.5 million documents that have been leaked still thrive under the garb of mystery. While the issue of Panama Leaks is ridden with questions, the answers of many which are lost in futility, it is no doubt, that this topic has invoked a lot of rage within Pakistan. Opposing political parties, not surprisingly, are trying to make political gains from the misery of the pressured ruling elite. On the other hand, the ruling party’s partisans are busy defending Mr Sharif with ad hominem logics rather than a cerebral approach. All this leaves the common man in a state of utter confusion and disappointment.
Clearing the confusion created by a sudden stir of leaks is fundamental to ensure that the common man can fully grasp the magnitude of the incidence. Panama is a Central American country with a population of around 3.9 million. It is considered a tax haven — the name given to countries where foreign individuals and companies are taxed at very low, or even nonexistent, rates — that offers less regulation and more privacy. The investors prefer registering off shore companies primarily for the purposes of tax avoidance. It is pertinent to realise the difference between tax avoidance and tax evasion, with the latter being a crime and former a seemingly profitable business strategy.
Now let’s put things into context and explore the details of what the Panama Leaks are and how they took the center stage. On the 3rd of April, an unprecedented leak of 11.5 million files from a database of the world’s fourth biggest offshore law firm; Mossack Fonseca, was perpetrated by the International Consortium of Investigative Journalists (ICIJ). The documents have brought to light the multitude of ways in which the rich have been taking advantage of discreet offshore tax regimes. Among the people involved, the count comes out to be 143 politicians, out of which a whopping 12 are national leaders. Apart from that there are families and close associates that have ties to the aforementioned politicians, each reaping the benefits of these tax havens.
The aftermath of these leaks brought outrage among the nations whose leaders were accused of having offshore companies in Panama. The reaction in Pakistan was no different. Mr Khan was quick to demand the prime minister’s resignation over the claim that his son owned offshore companies. Soon his demand gained impetus after the resignation of Iceland’s prime minister and Spain’s minister for industry over the very same issue. However, there are important distinctions that need to be made between the aforesaid officials and Pakistan’s prime minister.
The aftermath of these leaks brought outrage among the nations whose leaders were accused of having offshore companies in Panama. The reaction in Pakistan was no different
As far as Spain’s minister for industry, Jose Manuel Soria, is concerned it needs to be realised that a care-taker setup is present in Spain as of now for holding the general elections and Mr Soria was the acting minister for industry and not the permanent minister. The key distinction to be realised here is that he was on a temporary position and was not an elected representative of the masses either. Now comparing him to Mr Sharif, who is an elected prime minister and has the mandate of the 200 million people for the five-year period, would be unfair at the very least.
As far as Iceland’s prime minister’s abdication is concerned, it should first be noted that it was not a formal resignation and he merely left his office “for an unspecified period of time”. So it is more of an indefinite leave of absence, and not a resignation per se. Secondly, the documents have revealed that the prime minister sold his share of the company to his wife just before a new law took place. The law in question would require the minister to declare all ownerships as a conflict of interest. Last but not the least, the offshore company owned by Iceland’s prime minister lost a fortune as a result of the 2008 financial crash which severely crippled Iceland. This resulted in the company claiming millions from Icelandic banks, which clearly presented a conflict of interest for the prime minister as he stepped in to get involved with the process. Clearly, Mr Sharif can’t be compared with Mr Gunnlaugsson for multiple reasons. Firstly, Nawaz Sharif was only bound by law to declare his assets and those of his dependents; which include his wife and not his children; who happen to be owners of the offshore companies. Secondly, there is no actual evidence of any conflict of interest, no evidence that any of the offshore companies owned by Mr Sharif’s family benefitted from any undue favors at the expense of our national exchequer.
So far we haven’t seen any evidence to suggest tax evasion or any other dishonest financial gain on Mr Sharif’s part. Alas, he does not even hold an offshore company to his name. The demand for his resignation, before the investigation, is farcical. Now after the admission of Jehangir Khan Tareen regarding his family’s ownership of the offshore companies, the demand for Mr Sharif’s resignation is laden with irony. Not to forget, there are 212 other Pakistanis who own offshore companies and nobody should be given preferential treatment. Also, it needs to be realised that creating or owning an offshore company is not a crime.
So far we haven’t seen any evidence to suggest tax evasion or any other dishonest financial gain on Mr Sharif’s part. Alas, he does not even hold an offshore company to his name
Mr Khan needs to realise that demanding the PM’s resignation and gaining advantage from this political mess will not be beneficial for him in the long run and will only lead to a political impasse not an upheaval. The priority should be accountability and democracy. Democratic values should not be compromised in the name of justice propelled by vigilantism. Political point scoring at the cost of democratic norms is not the answer to this issue as it will only undermine the precepts of democracy. The only logical solution calls for an instatement of an independent judicial commission empowered to probe into the matter.