Tough times for PM! #PanamaPapers #Pakistan

Tough times for PM!


It is widely reported in media that during the meeting between Prime Minister and Chief of Army Staff on May 10, 2016, a loud and clear message was conveyed from men in khaki to men in mufti “to avoid the protracted controversy over the Panama Papers investigation.” Reportedly, General Raheel Sharif told Nawaz Sharif that tussle over the Panama Leaks was “affecting governance and national security.” It was suggested to the Prime Minister that “the issue needs to be urgently brought to a close.”

In the wake of a meeting between Prime Minister and Chief of Army Staff, the Opposition told media that it intended to pose seven questions in the National Assembly and Senate about the sources of assets owned by the family of Prime Minister as well as mode of transfer of funds from Pakistan or elsewhere. Nawaz Sharif is expected to answer these questions and make out his case today [May 13, 2016].

The Opposition is oblivious of the discrepancies and omissions that emerge from the nomination papers filed by Nawaz Sharif in 2013. It is strange that they do not do their homework. Unfortunately, instead of adopting the right legal course, they intend to resort to steps that would only benefit the tax cheats and plunderers of national wealth. This article highlights the crux of the issue and suggests the right actions that can ensure accountability and transparency in Pakistan.

In the Panama Leaks I and II, at least five offshore companies of offspring of our Premier have surfaced. In these companies, addresses of Saudi Arabia and Russia are used, while admitting ownership of expensive properties in London and elsewhere. Using offshore companies, loans worth millions of pounds were obtained from banks in Switzerland and Britain. Though the Panama Papers contain names of several other politicians and businessmen, but there is broad consensus among the Opposition in Pakistan that the probe should start with the Prime Minister and his family. They allege that actual investment in properties is by the Prime Minister and children are just benamdar (name lenders).

There is no denial by the Prime Minister till to this date of the fact that five offshore companies are managed by his offspring (Hussain, Hassan and Maryam) and luxury properties in London are owned through offshore companies and trusts. He also did not refute businesses conducted abroad by his sons. Prime Minister and his ardent defenders are adamant that “nothing wrong is committed”. But Opposition believes that though “ownership of properties is confessed”, the sources of investment and disclosures are missing in the local tax record. Was it mandatory for Prime Minister to make such disclosures? We intend to answer this vital question.

Nawaz Sharif, who is believed to be a billionaire twice over, is presently being probed by many, including the Transparency International. The entire episode, especially linkages with offshore companies for buying expensive properties abroad, is tarnishing the image of Pakistan. Thus, anxiety of military leadership is understandable. The hostile elements in US Senate even used it as a pretext to block F-16 sale. One wonders what is preventing the Prime Minister to present the evidence and shut all the mouths at home and abroad. It is in his and the country’s best interest. Hopefully, he will do it as early as possible to avoid further embarrassment for Pakistan internationally and political chaos at home.

Our investigation shows that numerous questions and dichotomies arise from documents contained in the Panama Papers and those filed by Nawaz Sharif, First Lady, Maryam Safdar (strangely her CNIC 2520158274244 shows name as ‘Marriyam Safdar’ and under this name she obtained National Tax Number 1308504-2 on 12th October 2001 c/o Chaudhry Sugar Mills) and Mohammad Safdar (husband of Maryam and member National Assembly), before Election Commission of Pakistan (ECP) and/or Federal Board of Revenue (FBR).

The total number of discrepancies and omissions are over 40 but the most ones are:

1. There is no disclosure by Prime Minister of any asset abroad of any of his dependents, though in his nomination papers, filed with ECP in 2013, he showed Maryam as dependent! It is admitted fact (the Panama Papers and interview of Hussain Nawaz) that Maryam has been sole owner of two BVI companies and also co-owner of one BVI company. She signed loan papers to secure funds against London properties. Even her husband Mohammad Safdar (as per website of National Assembly his permanent address is Jati Umrah, Raiwind Road) did not disclose assets of wife in his nomination papers. It is pertinent to mention that in 2011, Nawaz Sharif showed land worth Rs 24,851,526 in the name of Maryam Safdar as dependent!

2. First Lady in Tax Year 2012 declared income of only Rs 2,136 as profit from a bank account. She gave a loan of Rs 1,650,000 to mother-in-law and Rs 1,100,000 to one Farooq Barkat. She showed shares worth millions in four companies. In Chaudhry Sugar Mills her holding was shown at 506,147 shares (worth Rs 5,126,720). She received no dividend from any company! She also showed liability of Rs 500,000 as business capital overdrawn in the name of her younger daughter (Asma Ali Dar). No business connection is shown by Prime Minister though spouse has shown the same. Nawaz Sharif under the law was bound to show all the assets/liabilities of spouse and dependents.

3. The father of Prime Minister, the late Mian Muhammad Sharif, was owner of London property as per order of Queen Bench, London in the case of recovery of loan from Hudabiya Mills by Al-Towfeek Investment Bank. On his death, shares of Hudabiya Paper Mills were inherited by Prime Minister but property was not! This needs thorough probe and explanation.

4. The Prime Minister showed liability of Rs 110,000,000 in respect of Ramzan Sugar Mills as on 30-6-2011. The total net worth declared was Rs 149,398,035 (in 2010 net wealth was Rs 63,737,827). Total expenses were shown at Rs 19,878,706. No information is provided as to who was paying expenses of palatial Raiwind Palace (in papers it is shown as Shamim Farms in the name of mother who has no resources to bear its expenses).

5. Nawaz Sharif as per nomination papers filed in 2013 with ECP for contesting elections in 2013, showed total net wealth as on 30-06-2012 at Rs 261,659,827 and as on 30-06-2011 at Rs 166,049,542 showing accretion at Rs 95,610,542 whereas comparative analysis of wealth statements filed in income tax department for Tax Year 2011 and 2012 is tabulated in Table 1.

As per income tax/agricultural income tax returns, attached with the nomination form, the total income from all sources and personal expenditure are shown in Table 2.

6. From the aforesaid Table it is evident that out of declared and taxed income, no sources were available for accretion in net wealth over the period from 30.06.2010 to 30.06.2012. However, net wealth increased from Rs 63,737,827 as on 30.06.2010 to Rs 244,995,207 as on 30.06.2012, which was beyond the available (offered for tax) sources of income.

7. No Pakistani citizen can open foreign currency account exceeding US $1000 or equivalent in any other currency abroad without the approval of State Bank of Pakistan. Nawaz Sharif declared in 2011 foreign currency account in Jeddah with a balance more than the prescribed limit. After returning to Pakistan from what he called exile and before contesting elections, he should have closed this account or obtained approval from Pakistan.

8. That as per wealth reconciliation statement for tax year 2011, Nawaz Sharif showed the following gifts during the year:

Whereas Muhammad Safdar, husband of Mrs Maryam Safdar, in his statements of assets & liabilities as on 30.06.2011 to the ECP, as published in the Official Gazette, showed “no change in the assets during the year”. If the amount was gifted to the daughter through a cross cheque as required under the law, the husband was bound to declare it. It might have been an afterthought to reduce the net wealth as the accretion was substantial and Nawaz Sharif could not justify the same from his declared/taxed sources.

9. Nawaz Sharif, in his nomination papers, attached ‘Wealth Reconciliation Statement for Tax Year 2011’ on the format prescribed under the Income Tax Rules and this is reproduced in Table 3.

10. From Table 3 it is evident that the accretion is on account of gift from the son of Rs 129,836,905. This gift raises many questions. For example, as per section 39(3) of the Income Tax Ordinance, 2001 any amount claimed as gift should be received either through a cross cheque or through a banking channel from a person holding a National Tax Number. Admittedly, Hussain Nawaz was not an NTN holder. This amount was to be offered as income even if received through banking channel, which Nawaz Sharif had failed to do. This needs probe.

11. That as per Annex-B of return of total income for Tax Year 2011, the tax collected by bank on cash withdrawals has been shown at Rs 333,330 which when worked back at the prescribed rate of 0.3% comes to cash withdrawals of Rs 111,110,000. Such heavy cash withdrawals and their utilisation need to be probed.

12. As mentioned earlier, section 39(3) of the Income Tax Ordinance, 2001 requires that gift should have been through a cross cheque or a banking channel from an NTN holder (failing which these are to be treated as income of recipient). Gifts through prescribed modes are not shown by Maryam Safdar or her husband. As admitted, a huge amount of Rs 111,110,000 was withdrawn in cash from bank accounts by Nawaz Sharif. This indicates that the gifts of both the amounts were aimed at reducing the net wealth to match the available resources. If these gifts were in violation of section 39(3) of the Income Tax Ordinance, 2001 then both Hussain Nawaz and Maryam Safdar are guilty of avoiding tax. However for colourful transactions, action under sections 108 and 109 of the Income Tax Ordinance, 2001 is to be taken against the Prime Minister.

13. It is worth noting that ‘wealth statement’ is prescribed under the Income Tax Rules, 2001, and as provided under section 116(1) of the Income Tax Ordinance, 2001 it must contain the following particulars of:

a. Person’s total assets and liabilities

b. Total assets of the person’s spouse, minor children and other dependents

c. Any asset transferred by person to others during the year

d. Total expenditure incurred by the person and the person’s spouse, minor children and other dependents

e. The reconciliation statement of wealth

14. Nawaz Sharif, contrary to the provisions of section 116(2) of the Income Tax Ordinance, 2001, did not file Wealth Statement with the return of total income. He did not comply with the law even when pointed out through a note on the Acknowledgment Slip. In fact, Wealth Statements for the Tax Year 2012 and 2011 were filed just before the filing of nomination papers with detail are shown in Table 4.

15. As per Sr. No 4 of the FBR’s guideline to ECP for determination of tax default in cases where filing of ‘wealth statement’ was obligatory, the following were to be checked that whether the same has been filed:


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