A presentation at a convention “International Islamic Conference on Riba in Economy”

Black wealth is killing the documented economy.

By Yousuf Ibnul Hasan Islamic Banking and Applied Finance 

General Pervez Musharraf had given free media opportunity to the Pakistan media community in establishing Radio and Television Channels from their own financial resources, and arrangement. This had opened a dam of black money investment in the media industry and the illegal import of equipment flooded in the local market. Electronic market key players opened their links in Singapore, Dubai and Hong Kong. All payments for equipment were made through Hawala with no control of banks including State Bank of Pakistan. These invested funds form the black, hidden and holding no control of FBR due to party in this trade. At the same period, the Governor State Bank of Pakistan introduces Rs.5,000 denomination notes with an additional issuance of Prize Bond for a value of Rs 40,000 in unregistered (Be-Nami) that gave an opportunity to wealth owners in hiding of large volume of currency within small hidden space. It encouraged traveler to carry Rs. 2 million worth of currency in the pockets. The Airport authorities close their eyes on such smuggling at an underhand gift of 1% of the total volume of currency to fly abroad. The Dubai market is the heaven of Pak Currency and the main buyers are Indian Money Changers who buy Pak Rupees which was largely bought by CIA, Mossad, RAW and Afghan warlords for their purpose to disturb Pakistan security.

The then Information minister Sheikh Rasheed Ahmed opens the permission for a parallel electronic media against state-owned media, the PTV and PBC. This opened a large number of jobs and the newly developed media industry, a source having the evils, devils, and corruption in money matters. Then the gutter journalism develops and proofreaders become the anchors. The media owners started the media power through so-called journalist to acquire the operating capital from malpractice and professional corruption. The media knew that Pakistan is the most fertile market for generating income through media blackmailing as 90% is suffering the illness called corruption.

Pakistan media industry from 2001 seen buying illegal import of the audio and video equipment and trillion of rupee worth of machinery installed in media channels started coming without payment of duty and taxes as FBR operational wing acted as the party to such import. The media houses as a precaution procured the equipment’s and machinery through local suppliers who had arrangements with Pakistan Customs and Coast Guards.  The third the party brought this machinery without duty payment either from Karachi Ports or through dry ports of Faisalabad or by changing documents at Jamrud and Chaman Border where the presence of container is not necessary to cross the transit goods. Pakistan Custom had made trillions of rupees in such illegal trade and reliable sources investigated and identify this trillion of rupees scams in the media industry.

The illegal importers of the media equipment and instrument are so powerful that they cannot be touched. Customs officials were frequently offered the invitations to share the glitters and glimmer of the media industry with the fun of wine; women and money. State Bank of Pakistan kept itself on a honeymoon mood by printing large denomination currency notes and selling the large volume of fresh notes of currency dealers to get extra benefit at the foreign station. In addition, this printing created high yield foreign debts, burdening the common taxpayer. The media, civil servants, bankers, and smugglers are portraying themselves as “Rome is burning and Nero playing the flute”. Dr. Isharat Hussain and Dr. Shamshad Akhter were the two governors of the State Bank of Pakistan who is accounted for this dilemma. Dr. Shamshad Akhter after taking the office from Dr. Isharat Hussain never bother to look into the affairs of banking crises that Dr. Isharat Hussain had created by liquidating two prestigious financial houses the NDFC and BEL. She remains busy in the designing of new currency and introduces Rs5,000 note.

Every government cries for the documented economy but keep their vision close to the effects of high denomination currency notes and its circulation.  For documented economy, large denomination notes must be pulled back into the national treasury from the market circulation and new note of Rs.100 to be introduced as the largest denomination note in circulation. The large volume of currency holder should be given 100% amnesty to deposit the hidden wealth without fear and action in the banks with the condition that the withdrawals shall be maximum Rs25,000 per transaction, which shall be tax-free and over and above to this limit there will be withholding tax of 0.05%.

The amount of wealth kept in the banking account remains exempted from the income tax, whereas non-business accounts above to Rs10 million shall be subject to Wealth Tax of 1% annual. The black money brought to the bank cannot be replaced with any kind of currency and in any other form except to be kept with the bank and bank should not accept foreign currency deposit in cash to an equal value of Rs 500,000. However, any remittance that appears through the swift as the banking remittance from authorizing banking institution should not be subject to a question. But remittance equal or over to Rs.1 million in foreign currency to be permitted by the commercial banks upon valid purpose and reasons of remittance to support documentary evidence.

Credit Cards should be discouraging and Debit Cards to be encouraging without any charges or fee. The balance in Term Deposit, Fixed Deposit, and Profit and Loss account or in Current Account should be exempted from any kind of taxes on profit declared by the bank. The commercial banks must declare the profit on a monthly basis and the profit results should be without obligation and restriction of SBP to attract the deposits and promote the saving conduct. This will promote the high liquidity that decreases the cost of funds which also decrease the cost of the product and increase the affordability which increases the procurement, production, supply, and consumption which need the industrialization and create jobs that decrease crime in society.

All import and export should be routed through banks and duty and taxes on import, including a refund of duty drawback should the responsibility of facilitating bank. The facilitating bank should ensure the custom duty while releasing the import documents and get the refund from the State Bank of Pakistan upon receiving the export proceeds. This will further curb the malpractices of Customs and Tax authorities.

The restriction to the higher denomination of currency will develop a documented economy which is the contemporary need to overpower the financial and economic crises of Pakistan. This is the time to realize that the system running at the level of SBP, FBR, Banking Industry, Money Changers, Customs, and Regulatory authorities are affected like termites which have to be treated with the drastic measure and in these measures cash circulation should be converted into documented instruments which do not have any kind of cash involvement. It is expected that if targets are fixed to the tax collectors and assessment through digitalize programs the blackmailing of the black economy will be buried to the known destination. Now it needs accountability at lower to upper and not upper to lower. It is proven that when there is a will there is a way. The present government with their financial pandits who claim themselves to be patriotic, prove it or leave it as the next episode which is cooking at high burner is the common hand on the elite necks. The revolutions start from suffering and Pakistan nations are suffering from unsecured life in all respect.

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