On February 15, Pakistan became one of only four countries in the world that make tax records public. The other three are Norway, Finland and Sweden. A year ago, no one would have thought this was possible. Pakistan, after all, is a cesspool of corruption and a paragon of opacity. But check the website of the Federal Bureau of Revenue and you’ll find prominently displayed there a link to the Parliamentarians’ Tax Directory. Click on the link and you’ll get a PDF that lists how much income tax each and every member of Parliament paid in 2013. On March 31, a similar listing will be made publicly available for the tax payments of all citizens.
How in the world could this happen in Pakistan?
A large part of the credit should go to the intrepid Umar Cheema, founder of the Center for Investigative Reporting in Pakistan (CIRP), which in the past year published two well-documented reports that showed tax evasion on an epic scale. The success of this project inspired me to take up this blog again after several months of inactivity. It’s not always that investigative reporting makes such clear and dramatic impact. So it’s a good time to revisit a question that’s often asked: What kind of reporting makes an impact? What stars must align for reforms to follow in the wake of an exposé?
In the past two weeks, I have been lecturing my students about the importance of crafting the investigative narrative and engaging readers. Good narratives make impact, I said. Yet the two reports that the CIRP has published are densely written, numbers-packed pamphlets, each about 70 pages long. There are no sexy graphics, no stunning multimedia, no gripping and polished stories. The prose is dry – they could well have been written by the World Bank. Moreover, the reports confirmed what people in many developing countries already know: The rich don’t pay taxes. And yet they captured the popular imagination and forced the government to do the unthinkable. Why?
Pakistan is a basket case in terms of tax collection. It has one of the worst tax-to-GDP ratios in the world – just nine percent, worse even than Afghanistan’s 11 percent. Three years ago, the finance minister told parliament that Pakistan’s ratio was second to the bottom among 154 countries. Yet nothing was done.
In December 2012, the newly formed CIRP released its first report, which showed that two-thirds of Pakistani MPs did not pay taxes. Neither, it said, did the high-living, polo-playing, playboy President Asif Ali Zardari and more than half his Cabinet. The findings got wide play in Pakistan’s free-wheeling press. Perhaps it was the specificity of the details, the fact that it named and shamed and put precise numbers that showed the extent of the tax evasion – the report caught fire and stoked the public anger. (I wrote how that project was researched in an earlier post.)
About a third of all countries in the world now require officials to publicly disclose their assets. Institutions like the World Bank and the OECD see this as a good thing. Asset declarations, they say, are crucial tools for fighting corruption and holding officials accountable. As an investigative journalist in the Philippines, I found asset statements vital to digging into conflicts of interest and the illegal accumulation of wealth by those in public office. Asset statements are mother lodes of information – and journalists in Russia, South Africa, Bosnia and Thailand, to name only a few, have found them crucial to their investigations of official wrongdoing.
There is as yet no global consensus on the merits of asset transparency. Last week, Chinese authorities detained six anticorruption activists who had been demanding that senior Communist Party officials declare their wealth. The demands come in the wake of exposés in the U.S. press, including a report that recently won the Pulitzer Prize, on the billions – yes, billions – illegally amassed by the so-called Red Nobility.
But the pushback on official disclosures comes from an unlikely quarter as well.
Last Monday On April 15, President Obama signed a law that reversed a provision in The STOCK Act of 2012, which required members of Congress, legislative staff and senior officials of the executive branch to post their financial disclosures online. As my former student Sasha Chavkin pointed out in an informative piece for the Columbia Journalism Review, the 2012 law also came on the heels of scandal – a 60 Minutes exposé on insider trading by congressmen.
For some time now, critics of asset transparency have been saying that wealth disclosures are unnecessary violations of privacy. Rather than disincentivizing corruption, they say, disclosures only provide fodder for “asset porn.” More importantly, the National Academy of Public Administration (NAPA) in Washington, DC said in a recent study that these disclosures, if posted in online databases, pose dangers to law enforcement and national security. NAPA also asserted that asset disclosures have “limited value” in terms of detecting conflicts of interest or insider trading.
On April 15, for the first time ever, French government ministers were required to publicly declare what they own, in what has been called a historic Great Revelation or Le Grand Déballage. Like elsewhere, the demand for wealth disclosure was stoked by scandal.
In 2008, Italy’s deputy finance minister published online the declared incomes and corresponding taxes paid by everyone in the country. Vincenzo Visco had led the government’s campaign against tax evasion and believed that Italy’s debt had reached disastrous levels. He said the publication of tax data was “an exercise of transparency, of democracy.” That exercise, however, quickly ended as Italy’s data protection agency ordered the information taken down after a day, saying that its publication violated privacy.
Taxes most everywhere are a controversial issue – just ask Gerard Depardieu, who fled the high taxes of his native France and accepted the offer of Russian citizenship last week. Around the world, many governments are proposing painful solutions to the problem of public debt and imposing heavier tax burdens on citizens. As government services are cut because public coffers are bare, public attention is shifting to the taxes paid – or not paid – by the wealthy and the privileged.
The problem with investigating the taxes paid by individuals is that this information is confidential. And since Visco’s exercise in pique, no country has followed Italy’s example. The exception is Scandinavia, where tax information has been public for over a century (more on how to access this information below). In some countries, too, it’s customary, though not mandatory, for candidates for the highest office to disclose their tax returns. Even in secretive Ukraine, candidates in the last election made public their tax ID numbers and their properties.
There’s been a lot of progress in the last two decades in legislating the disclosure of the assets of officials. The World Bank says that 78 percent of 176 countries it surveyed recently had financial disclosure systems, although only 42 percent made the disclosures public. Asset disclosures, says the Bank, are essential to fighting corruption, illicit enrichment and tax crimes. A public-interest argument can be made that tax disclosures are also a crucial anticorruption tool, yet only a few countries – and no international financial institution – have proposed making such data open.
But if officials are already required to declare their income and assets, why shouldn’t they be required to make public their tax payments as well? It’s hard to argue that revealing information on private taxpayers is in the public interest. But government officials are supposed to set the example for tax compliance because they are the custodians of the public purse. Because they decide how the burden of tax payments is shared, then citizens should be told whether those they elect to office are carrying their fair share of that burden. There can be persuasive arguments as to why heads of state, Cabinet ministers and members of national legislatures should declare their taxes. Read the rest of this entry »
When journalist Umar Cheema launched the Center for Investigative Reporting in Pakistan (CIRP) last week, he did so with a bang: A blockbuster story that hit the headlines around the world. Two-thirds of Pakistani MPs, his report said, do not pay their taxes. Neither did President Asif Ali Zardari – famous for his spending sprees, polo games and luxurious country estates – and more than half the Cabinet.
One would think that given his history, Cheema would be more cautious about exposing wrongdoing. Two years ago, while driving home from a dinner, he was seized from his car by men in black commando garb. He was brought to a house where he was stripped naked, beaten and sexually assaulted. Unlike victims of similar abductions, Cheema spoke out and said Pakistan’s Inter-Services Intelligence (ISI) agency was responsible for the attack.
When I called him in Islamabad over the weekend, Cheema was still dealing with the furor raised by his tax story. He expected this. After all, he named names. In a 70-page booklet called, Representation without Taxation, which was released online and in a press conference last week, he listed all the members of Parliament who who didn’t pay any tax at all. He also published the names of those who had paid taxes in 2011 and the amounts they remitted to the government.
MPs roundly denied the charges and accused Cheema of being on the payroll of their rivals and of timing the report for the elections, which will likely be held in the spring. “The opposition and the administration have joined hands to wage attacks on me and malign me,” he said. But he could document each and every charge, including the last rupee of tax paid. It took six months, he said, to gather the information, verify and then verify again. He knew that he would pay dearly for any mistake. “We were doing naming and shaming,” he said, “and we had to be extra careful.”
As investigative reporter for The News, Cheema had taken on the military and the intelligence services and exposed Zardari’s corruption. Now he is on his biggest story yet.