Huzaima Bukhari and Dr Ikramul Haq
The ongoing debate on the issue of “dependent” (translated as zair-i-kifalat) of Maryam Safdar on her father in media and elsewhere needs to be analysed from a pure legal perspective. There prevails misconception that this term as used in fiscal codes and election laws has the same connotation as in Shariah Law, basically from the angle of “major” or “minor” vis-à-vis one who has to bear expenses of spouse and children etc. The factual position is that in tax codes specific meanings have been assigned to this term. Under the election laws, especially section 12(2)(f) of Representation of People Act, 1976 [ROPA], at the time of contesting elections, every candidate is required to file in the prescribed manner assets/liabilities of his/her along with those of spouse and dependent(s). The statement of assets and liabilities, submitted with nomination papers by the candidates, are the same as filed under section 114 and section 116 of the Income tax Ordinance, 2001. For determining the status of a person whether dependent or not vis-à-vis declaration of assets and liabilities, the provisions of the Income Tax Ordinance, 2001 [I.T. Ord. 2001] will have to be kept in view.
In terms of section 114(1)(vii), every person who has obtained National Tax Number (NTN) has to file return of income in the prescribed manner and also a wealth statement as required under section 116 of the Income Tax Ordinance, 2001 (this law is purportedly violated by Hussain Nawaz as he is an NTN holder but not filing tax returns as per Tax Directories for 2013, 2014, & 2015, published by FBR). In the wealth statement, every individual has to declare his/her total assets and liabilities as well as total assets and liabilities of his/her spouse, minor children, and “other dependents” and total expenditures incurred by him/her, spouse, minor children, and other dependents. The taxpayer also needs to mention any assets transferred to any other person during the relevant
tax year.
The word “dependent” is not defined in the I.T. Ord. 2001, ROPA and in General Clauses Act, 1897. As per established principles of interpretation, if a word or term is not defined in the statute and in the General Clauses Act then the ordinary dictionary meanings are to be employed. However, there is a departure to this rule in case of technical words that entail specific meanings in the context in which they are used. As evident from the use of the word ‘dependent’ in specific contextual perspective i.e. section 116 of the I.T Ord. 2001 and section 12(2) of ROPA, the technical meaning has to be assigned to this word which follows the words “spouse and minor children.” This means that it is used in purely economic terms to signify a person who depends or looks to another for financial support in one or the other for his maintenance or livelihood—S.K. Day v. D.C. Gagerna, AIR 1985 Del 169, 176. In Rajkumar Singhji v. Commissioner of Expenditure Tax AIR 1968 MP 107 at 111, it is held that: “Only that spouse or minor child, or any other person who is wholly or mainly dependent on the assessee for support and maintenance falls within the definition of the word ‘dependent’.” The same dictum was laid down in Azam Jah v. E.T. Officer, AIR 1970 AP 86 at 97.
The “other dependents”, for the purpose of declaring assets, liabilities and expenditure, must include those having financial support of candidate. This is clear from section 2(c) of National Accountability Ordinance, 1999 which says “assets” means “any property owned, controlled by or belonging to any accused, whether directly or indirectly, or held benami in the name of his spouse or relatives or associates, whether within or outside Pakistan which he cannot reasonably account for, or for which he cannot prove payment of full and lawful consideration”. In taxation matters this is evident from plain reading of section 116 of the I.T Ord. 2001 read with relevant rules. In Black’s Law Dictionary, the word “dependent” is explained “a person who receives support from another person for assets and expenditure”. This term of a technical nature should not be confused with the usage of the same in other laws. Section 12(2) of ROPA and section 116 of the IT Ord. 2001 require complete disclosure of all assets, liabilities and expenditure not only incurred personally but also in the case of spouse, minor children or any other dependent. In view of this legal position, Maryam Safdar was dependent on Nawaz Sharif up to tax year 2011 as evident from his admission in column 18 of wealth statement filed for tax year 2011. From next tax year, Maryam Safdar started declaring income from agricultural and non-agricultural sources and Nawaz Sharif also omitted her name from column 18 of the wealth statement. It means that Nawaz Sharif was bound to declare assets and liabilities of Maryam Safdar in his declarations till tax year 2011 which he has failed to do.
Maryam Safdar was dependent on her father till tax year 2011 as evident from the following incontrovertible facts she declared in tax returns:
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Tax Year Income declared Personal expenses Excess personal Gifts during
as per Tax Return declared as per expenses over the year by
Tax Return declared income Nawaz Sharif
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2012 Rs.2,314,917 Rs.3,580,458 Rs.1,265,541 Rs.51,624,000
2011 Rs. 32,283 Rs.2,295,560 Rs.2,263,277 Rs.31,700,000
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Contrary to what has been claimed in Supreme Court that income of spouse was enough to meet expenses, Maryam Safdar till 2011, as per tax returns, had no sources to meet even personal expenses what to talk of buying agricultural lands. The net wealth of Rs.172,963,168 of Maryam Safdar as on 30/06/2012 was reconciled through gifts from father. Even her travel expenses were more than her total income and that of her spouse. It shows her economic dependence on father—the term “any other dependent” as used in the Income Tax Ordinance, 2001 and ROP is a technical term whereas Mian Nawaz Sharif and Maryam Safdar in their statements before Supreme Court have confused it with ordinary dictionary meaning or concept contained in Shariah.
In election laws, the real issue is determination of true financial status of a person in terms of his/her holding assets, sources of income and details of expenditure. Any asset kept in the name of any other person has to be shown by him/her. If any candidate camouflages assets or does not declare those held in the name of any other person (spouse, minor children or any other person, whether related or not) it would disqualify him/her. Any undisclosed asset, held through any legal instrument that may include the mask of trustee, beneficial owner or benami falls within the ambit of corruption or corrupt practices with the ambit of section 78 of ROPA. It is explained by Supreme Court in Rai Hassan Nawaz v Haji Muhammad Ayub & others [Civil Appeal No. 532 of 2015], as under:
“Where assets, liabilities, earnings and income of an elected or contesting candidate are camouflaged or concealed by resort to different legal devices including benami, trustee, nominee, etc. arrangements for constituting holders of title, it would be appropriate for a learned Election Tribunal to probe whether the beneficial interest in such assets or income resides in the elected or contesting candidate in order to ascertain if his false or incorrect statement of declaration under Section 12(2) of the ROPA is intentional or otherwise.”
In the statement filed in Supreme Court by Maryam Safdar vide C.M.A. No. 259 of 2017 in CP No. 29 of 2016, it is claimed that agricultural land purchased in her name in 2011 by her father was correctly written in column 12 of wealth statement because there was no separate column for independent children in the form at that time. The tax return form was changed in 2015 by the FBR and it added the column for ‘others’ then. It is further claimed that Maryam Safdar was herself a tax filer at the time of the purchase of the land. She got the plot registered in her name the next year after paying the amount through bank and showed the land under her name in 2012 tax year.
The above statement by Maryam Safdar is incorrect inter alia for the following:
1. Since the title of property was in the name of Maryam Safdar and she being adult, married and claiming not to be dependent on parents, was supposed to declare property in her wealth statement unless she was dependent of father. A dependent is someone who is unable to care for or support themselves and looks for such care and/or support from another. Under the tax rules of Pakistan, United State and many other countries, “a person is dependent, who has a certain relationship to the taxpayer, such as a son or daughter, brother or sister, mother or father, etc., or who makes the taxpayer’s household his or her primary residence”.
2. The change in the format of wealth statement made through Notification No. SRO 841(I)/2015, dated August 26, 2015 was of no significance as principle was the same as under old column 12 which was titled, ‘assets, if any, standing in the name of spouse, minor children and other dependents’. In the new format only title of column 12 was changed to ‘assets in others’ name’ but principle remained the same as Note in the same SRO for filling this column says: assets created in the name of spouse(s), children and other dependents should only be declared if acquired by them with funds provided by you (Benami Assets)’. Nawaz Sharif did not mention in the wealth statement filed for Tax Year 2011 that Maryam Safdar for this property was benamdar (ostensible owner).
3. The question is: How could Nawaz Sharif show asset of an adult, claiming not to be dependent on him, in his wealth statement when title was also not in his name? It needs to be highlighted that in Tax Year 2011, the same year in which property was shown in the name of daughter, Nawaz Sharif also showed an amount of Rs 31,700,000 as gift to his daughter.
4. Maryam Safdar [CNIC 25201-5827424-4] obtained National Tax Number [1308504-2] on October 12, 2001; has been filing tax returns using the spellings ‘Marriyam Safdar’. In his wealth statement for tax year 2011, Nawaz Sharif spelled her name as ‘Maryam Safdar’. Strangely, in the passport, used for offshore companies, spellings appear as ‘Mariam Safdar’ (mentioned as such in Panama Papers). In her tweet account, the name is: Maryam Nawaz Sharif.
5. Nawaz Sharif in his wealth statement as on 30.06.2011 declared asset with the description “land in the name of daughter Maryam Safdar” at Rs 24,851,526. In the very next year that is wealth statement as on 30.06.2012, he did not declare this property. According to a concise statement filed in Supreme Court, he sold out this property to his daughter.
6. In wealth statement as on 30.06.2012, Maryam Safdar declared a new agricultural property with the description “140 kanals 03 marla land at Mouza Sultankey” that appears for value of Rs.41,996,191. This cannot be the same property because had it been statedly sold for the same consideration i.e. Rs 24,851,526 it should have been declared by Respondent No.6 and if the said property was sold at premium, the resultant gain of Rs 17,144,665 (41,996,191-24,851,526) should have been declared. This is a clear contradiction. For all her properties and expenses she in fact, mainly depends on her father and even for agricultural income shown by her, investment/gift was made by father.
7. In wealth statement as on 30.06.2011, Maryam Safdar showed agricultural land valuing Rs 32,058,930 and gift from father at Rs 31,700,000. Similarly, another agricultural property valuing Rs 41,996,191 appeared and another gift from father claimed at Rs 51,624,000 proving her total dependence on father. It is clear that for acquiring assets (agricultural lands) she had to take gifts from father. In other words, own money of Nawaz Sharif was diverted to show assets in the name of daughter who had no resources of her own.
8. A gift of Rs 129,836,905 was received by Nawaz Sharif in Tax Year 2011 from son living abroad and out of that Rs 371,000,000 was given as gift to Maryam Safdar and Rs 19,459,440 to Mian Hussain Nawaz. It means gift was from Hassan Nawaz who has no NTN in Pakistan. If amount of gift was available to Maryam Safdar before purchasing agricultural land, there would have been no need for Nawaz Sharif to show the same in his wealth statement for tax year 2011. It is obvious that had she declared this property in her return, she could not be in a position to justify the sources. If this is not the case then Maryam Safdar was dependent of Nawaz Sharif in Tax Year 2011. The change of stance is now due to the fact that neither Maryam nor the Prime Minister ever showed any foreign property/interest in their wealth statements.
9. Hussain Nawaz has claimed in a concise statement that he is owner of Mayfair flats since 2006 through direct transfer from royal family of Qatar, and that sister is only a trustee. Interestingly, this fact was not in the knowledge of Maryam Safdar in 2011 when she joined a TV telecast at her own to refute the charges of ownership of any property in London in the name of any family member! Every trust in UK is required to be registered with Her Majesty Revenue & Customs (HMRC) by filing application on a prescribed form. HMRC issues a Unique Tax Reference (UTR) number and every year, the trustee is required to file income tax return of trust. Did Maryam ever file any return in UK as trustee? If so the evidence to this effect should be produced. Our Supreme Court in a recent case, Muhammad Ali & Others v Syed Dabir Ali & Others (2016 SCMR 2164), held that a trust deed, where except beneficiary no other witness is available, has no legal sanctity
10. The receipt of gifts from son (Hussain Nawaz) from outside Pakistan also confirms that Nawaz Sharif and Maryam Safdar were beneficiaries of funds/money lying abroad. This attracts section 9(a)(v) of National Accountability Ordinance, 1999 which says:
A holder of a public office, or any other person, is said to commit or to have committed the offence of corruption and corrupt practices-
if he or any of his dependents or benamidar owns, possesses, or has acquired right or title in any assets or holds irrevocable power of attorney in respect of any assets; or pecuniary resources disproportionate to his known sources of income, which he cannot reasonably account for or maintains a standard of living beyond that which is commensurate with his sources of income.
11. In the case of Maryam Safdar, Hussain Nawaz could have sent gift (sic) directly to her as she purportedly looks after his properties as a trustee! Since she received money (gift) from father through brother living abroad, nexus with some undeclared funds/assets abroad, it attracts section 108 read with section 85 and section 109 of the ITO both for Nawaz Sharif and Maryam Nawaz.
The determination of economic ‘dependency’ of Maryam Safdar on father is thus not difficult on the basis of available data. Under the relevant tax code, any person who relies on someone else for support qualifies as a taxpayer’s ‘dependent’. It is universally accepted and well-established legal principle that ‘dependent’ is a person who relies on another, especially a family member, for financial support.
While analyzing the conduct of business and holding of assets by politically-exposed people through offshore companies, the following comments in The Guardian by Juliette Garside, David Pegg and Jason Burke [Pakistani PM’s children raised £7m against UK flats owned offshore, April 5, 2016] are worth reading as they also present the view of Sharif family that is not presented fairly in our media:
The children of Pakistan’s prime minister, Nawaz Sharif, raised a £7m loan from Deutsche Bank against four flats in Park Lane in London owned by offshore companies.
Acquired while Sharif was in opposition, the properties were owned by British Virgin Islands shelf companies on the books of the offshore agent Mossack Fonseca, the Panama Papers show.
The Sharif family’s investment in upmarket London property was disclosed in 1998 by Rehman Malik, a political opponent and the head of Pakistan’s Federal Investigation Agency, who had fled to London after allegedly being arrested and tortured.
Malik compiled a report that he claimed showed the Mayfair homes had been bought using “ill-gotten wealth earned through corrupt practices”. He claimed they had not been declared on tax returns, in breach of Pakistani law.
A note on the files warned not to offer Mossack Fonseca’s own staff as nominee directors or shareholders. The British Virgin Islands authorities were alerted, in a letter that mentioned Mariam Safdar was the owner of Nielsen and that the company had a loan with Deutsche Bank in Geneva.
But the firm appears to have carried on processing paperwork, including the appointment of new directors, and acted for the Sharifs until their companies were transferred to another representative two years later.
Anti-money-laundering laws and guidelines require licensed organisations and individuals, including banks, accountants and lawyers, to carry out enhanced checks on politicians, public officials, their friends and associates. So-called politically exposed persons (PEPs) have the same legal right to be directors and shareholders in offshore companies as other individuals. But their dealings are supposed to attract additional scrutiny, particularly with regard to the sources of funds.
In their statement, the family said the companies in question belonged to Hussain Nawaz Sharif and not his sister, and that he had filed all relevant tax returns. “None of the corporations mentioned are owned or run by Mr. Nawaz Sharif, the prime minister of Pakistan. Ms Mariam Nawaz Sharif is not a beneficiary or owner of any of these companies.” The statement added that Ms Nawaz Sharif had not received any income or financial benefits from the corporations owned by her brother “that warrant any tax disclosures or implications”.
“Ms Mariam Sharif is merely a trustee of the corporations owned by Mr Hussain Nawaz, which only entitle her to distribute the assets to Mr Hussain Nawaz’s family if required. Mrs Hussain Nawaz has unequivocally and clearly disclosed all corporations mentioned in the leaks, their sources of funding – primarily the sales of the steel mill in Jeddah – and other financial facts in recently televised interviews.”
Mossack Fonseca said: “PEPs do not have to be rejected just for being so, it is just a matter of proper risk analysis and administration. We have duly established policies and procedures to identify and handle those cases where individuals either qualify as PEPs or are related to them. PEPs are considered to be high risk individuals. Hence, enhanced due diligence procedures apply in these cases. Periodic follow-up is conducted to assure that no negative results are found.”
The tax codes of Pakistan, like other laws of the world, contain specific provisions aimed at countering “tax evasion”. The expression “tax evasion” under section 109(2) of the Income Tax Ordinance, 2001 is defined exclusively (meaning by no other meaning can be assigned to it) as “any transaction where one of the main purposes of a person in entering into the transaction is the avoidance or reduction of any person’s liability to tax under this Ordinance”. It confirms beyond doubt that the scope of “tax evasion” is enlarged to cover even legal tax avoidance scheme that results in reduction of tax liability of a person. In this perspective, the law [sections 85, 108 read with section 109 of the Income Tax ordinance, 2001] requires that holding of assets through offshore companies, benami, trust etc should be treated as tax evasion if nexus with untaxed funds is established. This is what the Panama Papers exactly establish in the case of many persons all over the world, including Nawaz Sharif and his family, as well many others in Pakistan. It is strange that Federal Board of Revenue is not invoking provisions of sections 85, 108 read with section 109 of the Income Tax Ordinance, 2001 that are unambiguous and unequivocal on the issue.
The National Accountability Bureau is also showing complete apathy and indifference though National Accountability Ordinance, 1999 provides for “effective measures for the detection, investigation, prosecution and speedy disposal of cases involving corruption, corrupt practices, misuse or abuse of power or authority, misappropriation of property, taking of kickbacks, commissions and for matters connected and ancillary or incidental thereto”. The National Accountability Ordinance, 1999, effective from January 1, 1985, extends to the whole of Pakistan and applies to all persons in Pakistan, all citizens of Pakistan and persons who are or have been in the service of Pakistan wherever they may be, including areas which are part of Federally and Provincially Administered Tribal Areas. (The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS). The views expressed here are those of the authors and do not necessarily represent or reflect the views of Business Recorder. We make no reresentations as to accuracy, completeness, timeliness, suitability or validity of any information presented in this article)
