Assets Stashed Abroad And Dirty Games Of Politicians

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Pakistan’s efforts to retrieve illicit assets from the Swiss banks have stalled due to political delays, failed treaties, and reluctance, allowing elites to move billions abroad without accountability

2024-10-05T14:14:00+05:00 Dr. Ikramul Haq

The interim Government [of Bangladesh] on September 28, 2024, restructured an inter-agency task force meant to bring back money illegally taken abroad. Headed by the Bangladesh Bank governor, the nine-member task force has become operational with immediate effect, said the finance ministry in a notification—The Daily Star, September 29, 2024 

US Secretary of State Antony Blinken has assured the chief adviser of the interim government of Bangladesh that the US government would help Bangladesh bring back the stolen money and provide support to eliminate corruption…. The amount of money illegally sent abroad is believed to be over Tk 100,000 crore, said a press statement issued by the office of the chief adviser to the interim government at the end of last monthThe Business Post, September 27, 2024

The cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion is estimated at between US$1 trillion and US$1.6 trillion per year. The corrupt money associated with bribes received by public officials from developing and transition countries is estimated at US$20 billion to US$40 billion per year—a figure equivalent to 20% to 40% of flows of official development assistance (ODA)Stolen Assets Recovery (StAR) Initiative: Challenges, Opportunities, and Action Plan, published jointly by the World Bank and United Nations Office on Drugs & Crime. 

The issue of retrieving alleged untaxed and ill-gotten assets stashed abroad is almost dead in Pakistan, as highlighted in a detailed article published in these columns on April 6, 2024. The issues raised in the article and facts narrated therein went unnoticed by those in power now. Their protectors allegedly hold assets of billions of dollars outside Pakistan, the trail of which was never provided by them, despite tall claims of providing the same whenever required by any court of competent jurisdiction. Unfortunately, the so-called vibrant (sic) media and members of formidable civil society (these days more engrossed in useless debates on social platforms) also failed to take note of it. 

Ishaq Dar, et al, anticipated that there would be no agreement or if Switzerland did agree, they would disown it making the junior officer a scapegoat by alleging that he was not authorised to sign it. The plan worked just as the politicians desired

The sordid story of potentially cheating the nation over the issue of unlawful assets stashed abroad started with Muhammad Ishaq Dar, presently Pakistan’s fourth Deputy Prime Minister and thirty-ninth Foreign Minister as well as Leader of the House in Senate. On March 7, 2017, in his capacity as the federal finance minister, Ishaq Dar told the National Assembly: Pakistan will sign an agreement with Switzerland on the exchange of information regarding bank accounts on March 21, 2017. He informed fellow parliamentarians: Several media reports have surfaced over the years alleging that Pakistanis have evaded taxes—a hefty amount of over $180-200 billion—and stashed the money in Swiss banks. He claimed the situation demanded that Pakistan approach the Swiss government for a treaty surrounding the exchange of information.

Ishaq Dar did not tell the House what happened in August 2014 when the Chairman of the Federal Board of Revenue (FBR) was to lead a delegation to Switzerland to “re-negotiate and upgrade treaty on Avoidance of Double Taxation [DTA] to retrieve and/or tax undeclared money deposited in the Swiss banks by Pakistani nationals”.

At the last moment, the then-FBR Chairman Tariq Bajwa was asked not to go, and FBR's Chief of International Taxes Muhammad Ashfaq, who was later appointed as the FBR chief, was sent alone. Ishaq Dar, et al, anticipated that there would be no agreement or if Switzerland did agree, they would disown it making the junior officer a scapegoat by alleging that he was not authorised to sign it. The plan worked just as the politicians desired.

The most-favoured-nation status was just another play-up since Pakistan got a much better deal on royalty, interest, and shipping. The Swiss wanted assurances that if Pakistan gave better terms to any other country, they would demand the same

The treaty renegotiated and inked after talks [August 24-26, 2014], was blocked first by political masters and reasons were found subsequently through hand-picked bureaucrats that were exposed in Pakistani cash in Swiss banks pulled out (The Express Tribune, February 22, 2017). The reasons for not honouring the renegotiated treaty were a sham. It was claimed that a reduction in the rate of dividends to 5% was unacceptable. Pakistan, at that time and still has a 5% dividend rate with over a dozen countries—this reduced rate was signed with Spain and the Czech Republic in 2016 after the political masters had frustrated the Swiss Treaty.

The most-favoured-nation status was just another play-up since Pakistan got a much better deal on royalty, interest, and shipping. The Swiss wanted an assurance that if Pakistan gave better terms to any other country, they would demand the same. It was more of a technical thing hung in the distant future and contingent upon many "ifs" and "butts" and had no price tag for Pakistan immediately as wrongly claimed in the National Assembly by the Ishaq Dar.

Though our worthy former finance minister and financial wizard (sic) of Pakistan Muslim League (Nawaz)—PML-N —was fully aware of the fact that the majority of offshore companies of Pakistanis were registered in the British Virgin Islands, he did not take any initiative to sign a Tax Information Exchange Agreement (TIEA) with the British Virgin Islands like India had signed way back in 2011. Till today, none of his successors have paid any heed to it either, including a former cricketer who expressly promised to retrieve looted wealth stashed abroad within the first 90 days of his government.

It is a matter of record that under successive governments in Pakistan, till today, no serious effort has been made to retrieve Pakistan's alleged looted wealth by invoking Swiss law (Foreign Illicit Assets Act (FIAA) of 18 December 2015) or tax losses caused by non-reporting of income by Pakistanis having off-shore accounts. On the contrary, the governments of PML-N and Pakistan Tehreek-i-Insaf (PTI) gave unprecedented money withering and tax amnesty schemes in 2018 and 2019 that can broadly be considered as unconstitutional.

The Opposition in successive National Assemblies and Senate have also never tabled any bill to express their interest and concern on the matter of the Foreign Illicit Assets Act (FIAA) of 18 December 2015, proving beyond any doubt that an unholy, anti-people alliance lurks among all forces of loot on this issue - and their statements in the parliament or media are merely for public consumption. It is high time that all the documents related to the 2014 negotiations for the Swiss Treaty are made public so that the masses can learn the truth about the dirty games our politicians play.

Our men in power tried to hoodwink the masses by saying that they were going for the Organisation for Economic Cooperation and Development (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters. They were just buying time to ensure that no information comes to Pakistan till the time they rule.

On March 21, 2017, according to a statement released by the Press Information Department, Pakistan and Switzerland had signed a revised Agreement on Avoidance of Double Taxation concerning taxes on income. It noted: “One of the highlights of the re-negotiated treaty is the replacement of the Article on ‘Exchange of Information’ with the new one reflecting the internationally accepted standard which is based on the OECD Model. The new Article on Exchange of Information will considerably expand the existing scope of information to be obtained on a request basis for the enforcement of domestic tax laws. It will also provide access to bank information for tax purposes and such information shall not be refused solely because the information is held by a bank or other financial institution. For this purpose, the Requesting State will be providing information to the Requested State such as the identity of the person under investigation and the period for which the information is requested”.

On October 1, 2010, the Swiss Parliament had passed a law, The Restitution of Illicit Assets Act, 2010 (RIAA), empowering the Swiss Federal Tax Administration (FTA) to sign DTAs based on a revised Article 26 of the OECD Model Tax Convention and cooperate with international requests for exchange of bank information of all kinds. In the wake of this development, many countries approached Switzerland to upgrade their DTAs to incorporate OECD’s Article 26.

The United States, Germany, France, the United Kingdom, the Netherlands, Qatar, and India, after incorporating revised Article 26 of OECD, started reaping notable tax revenue gains and receiving capital from Switzerland. Our men in power tried to hoodwink the masses by saying that they were going for the Organisation for Economic Cooperation and Development (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters. They were just buying time to ensure that no information comes to Pakistan till the time they rule.

The government of PML-N approved on September 20, 2013, the summary for renegotiating with the Swiss government, but then it played its dirty tricks. By not honouring the 2014 renegotiated treaty, it allowed many, sufficient time to shift shady funds from Swiss banks

This scribe, in 2010, repeatedly demanded in various articles stressing the government to approach Switzerland for re-negotiating the DTA, but the matter was constantly delayed by politicians. After reading these articles, FBR moved a summary in 2013 for re-negotiating the DTA with Switzerland, but the then-PPP government did not respond. At least three summaries moved from time to time were shoved under the carpet. The reasons behind this apathy were discussed in detail in Probing Swiss Accounts (Business Recorder, August 15, 2014), and in The Swiss Accounts, published on September 9, 2013. Asif Ali Zardari, now a second-time President of Pakistan, reportedly got his $60 million moved from Swiss banks and never bothered to inform the nation where the money came from and how much tax he had paid on it in Pakistan or elsewhere.

After pressure from inside and international donors, the government of PML-N approved on September 20, 2013, the summary for renegotiating with the Swiss government, but then it played its dirty tricks, as narrated above. By not honouring the 2014 renegotiated treaty, it allowed many, sufficient time to shift shady funds from Swiss banks.

The apprehension that the new treaty signed on March 21, 2017, would not yield the desired results after coming into force thus proved correct. It confirmed that the delay was intentional, willful, and well-planned—though crafty politicians were taking credit for taking actions in “national interest” while hoodwinking the public.

On March 9, 2014, the Ministry of Finance, in a written reply, informed the National Assembly that the government “was engaging with Swiss authorities to get to the money, hidden away by various Pakistani nationals”. In a detailed response to a question raised by PTI's Dr Arif Alvi, the ministry quoted statements by a Swiss banker and a former Swiss government minister: “One of the directors of Credit Suisse AG stated on the record that $97 billion worth of Pakistani capital was deposited only in his bank.” Similarly, Micheline Calmy-Rey, a former Swiss Foreign Minister, “is reported to have put the amount of Pakistani money hidden in Switzerland at $200 billion—a statement that was never contradicted,” the statement added. 

Successive governments in Pakistan, unfortunately, adopted a policy of appeasement towards tax cheats, drug barons and looters of national wealth, etc. Even private efforts to invoke extraordinary jurisdiction of the Supreme Court and High Courts to retrieve looted wealth and untaxed money have not been fruitful

The Finance Ministry at that time claimed that there were reasons to believe that the figures were correct. Later, the then-Finance Minister, Ishaq Dar said the government was working under the ambit of RIAA, which “allows the Swiss government to exchange information that was earlier considered confidential regarding money that might have been obtained illegally and deposited in Swiss banks”. He also briefed the House on the steps the government was taking to get the money back. All this proved to be a farce!

Amid a global squeeze on tax evasion, money laundering, and blatant outflows of capital, Switzerland’s 11 largest banks, according to many reports, housed nearly $7 trillion of the world’s total offshore liquidity stock of $32 trillion, and Pakistan had a substantial share in it before 2014. Switzerland has traditionally been the oldest, the most formidable, and the most popular secret banking jurisdiction, attracting massive sums of tax-evaded money from across the world into its banks with numbered accounts. Since 2009, the US and EU have consistently been pressing Switzerland and other tax havens to allow international tax administrations to track illegal funds parked in their secretive banks. 

The issue of tax avoidance by keeping accounts in tax havens became a highly charged political issue in the world, especially after the Bahamas Leaks and Panama Leaks. In the Pakistani case, additionally, our corrupt elites had placements of enormous funds in Dubai and elsewhere, as proved by Dubai Unlocked and Suisse Secrets. 

The successive governments in Pakistan, unfortunately, adopted a policy of appeasement towards tax cheats, drug barons and looters of national wealth, etc. Even private efforts to invoke extraordinary jurisdiction of the Supreme Court and High Courts to retrieve looted wealth and untaxed money have not been fruitful. The Supreme Court in 2012 and 2013 declared the petitions filed by some individuals as “non-maintainable” and the same was the fate of many petitions in the Lahore High Court. On the contrary, the Indian Supreme Court, in its historic decision of July 4, 2011, in the case of Ram Jethmalani and Other v Union of India [ (2011) 8 SCC 1=2011 PTR 1933 (S.C. Ind)], ordered to form a ‘Special Investigation Team’ (SIT) to supervise the government-led investigations into black money belonging to Indians, lying abroad. The Congress government did not implement it and went into review. However, the government of Narendra Modi after coming into power on May 26, 2014, immediately constituted the SIT and started negotiations with Switzerland. India succeeded where we miserably failed, and now the interim government of Bangladesh is showing us light on what to demand from the United States.

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