Public office & public accountability—III An audit beyond the form

Comparing tax and asset declarations requires a common accounting basis, evidence and a fair opportunity to explain differences

An official buys a flat for Rs. 25 million. His declared annual salary is much smaller. A photograph of the building circulates, followed by an accusation that the purchase proves corruption. The accusation may be correct. It may also collapse when the records show Rs. 5 million of verified savings and a genuine Rs. 20 million mortgage. Public accountability begins with establishing which explanation the evidence supports.

Consider this explicitly hypothetical transaction. Before purchase, the official owns savings of Rs. 5 million. After purchase, he owns a flat costing Rs. 25 million and owes the bank Rs. 20 million. His net wealth remains Rs. 5 million, before transaction costs and other changes. Treating the entire purchase price as unexplained income would be an elementary accounting error. Ignoring the purchase altogether would be equally irresponsible.

Pakistan’s proposed parliamentary disclosure system must employ people who can read financial records. Its purpose should be to test the completeness and credibility of declarations across different legal systems. It should identify the beneficial owner, trace the financing and establish whether the relevant obligations were met. A spreadsheet that merely highlights unequal numbers will generate allegations faster than it produces truth.

The Income Tax Ordinance, 2001 already contains the essential tax instruments. Section 114 governs income returns, section 116 wealth statements and reconciliation, and section 116A specified foreign-income and asset disclosures. Section 111 addresses unexplained income or assets. These provisions have different purposes and conditions. None authorises a parliamentary committee to replace the statutory assessment process with its own tax demand.

Electoral declarations have their own function. Under section 137 of the Elections Act, 2017, legislators report assets and liabilities, including the prescribed family coverage, at the specified annual date. Service declarations now include the framework under the Civil Servants (Conduct) Rules, 2026. A proper examination begins by recording what each document required, who was covered and the period it described.

The first comparison should establish a common date. An asset sold between two reporting dates is not necessarily concealed because it appears in only one statement. Foreign accounts may have different statement periods. Currency movements may alter their rupee value without any new investment. A verification officer must reconcile these differences before calculating an unexplained increase.

Valuation needs similar discipline. Acquisition cost, current market value and a prescribed tax valuation are different measures. If the form requires cost, a property bought years ago will not become a false declaration merely because its market price has risen. 

The law should require both the prescribed value and a clear valuation basis, with a separate current-value field where justified. A rule intended to expose concealment must not penalise compliance with another rule.

The next step is to trace changes in net wealth against income, expenditure, gifts, inheritances, loans and disposals. Each explanation should be supported by the appropriate evidence. A gift requires more than the word “gift” typed beside a large figure. A loan requires an identifiable lender, terms and a credible payment trail. A sale requires evidence of the asset sold and the consideration received. Verification should also avoid counting the same inflow twice.

Agricultural income illustrates why legal competence matters. Federal exemption does not establish that provincial agricultural income tax has been paid. The examiner should obtain the relevant provincial return and payment record where required. The proviso to section 111 concerning explanations based on agricultural income must be applied according to its terms. Federal tax officials cannot simply invent a federal agricultural tax, while an officeholder cannot use a convenient label as conclusive proof of funds.

Public benefits require a separate reconciliation. Salary provisions, including section 13 governing perquisites, must be read with the applicable valuation rules and lawful exemptions. Some benefits may be taxable; others may be expressly exempt or constitute official expenditure rather than personal remuneration. The financial-disclosure register should identify material benefits and their public cost regardless of whether a particular benefit attracts income tax. Transparency would reveal the privilege; legislation would determine its tax treatment.

Ownership should be examined beyond the name appearing on a title deed. A company, trust or nominee can hold an asset for someone else. The question is who controls the arrangement or receives the economic benefit. Relevant company and property records should be compared under lawful information-sharing powers. 

Overseas information must be obtained and used subject to the governing treaties and confidentiality conditions. Access for one legal purpose is not automatic permission to publish everything received.

Family information must be handled with equal care. Disclosure requirements should prevent concealment through related persons while respecting independent ownership. Marriage does not make one spouse the owner of everything held by the other. 

An adult child’s assets should not be attributed to a parent merely because the relationship exists. The law must specify the reporting duty and investigators must establish the facts supporting any attribution.

The September 2026 implementation memorandum already envisages risk-based verification by the Federal Board of Revenue (FBR), with results communicated to cadre administrators. That arrangement needs published standards for selecting cases and recording their disposal. Unusually large changes, inconsistent financing and ownership discrepancies may justify examination. A random sample would help test whether the criteria are missing important cases or being manipulated.

Every proposed adverse finding should identify the document, transaction, legal duty and unresolved difference. The person concerned must have time to reply and correct genuine errors. Corrections should remain visible in the record; deliberate concealment should not disappear merely because it was eventually amended. A reasoned decision must distinguish a clerical mistake from a material omission and explain whether further proceedings are warranted.

Different findings belong before different authorities. A tax issue goes through tax proceedings; a false electoral statement through the applicable election-law procedure; a service breach through disciplinary rules; and evidence of a crime to the legally competent investigative body. Limitation periods, evidentiary requirements and appeal rights continue to apply. A referral is the beginning of a legal process, not proof of guilt.

Company ownership presents another common trap. A shareholder’s interest in a company and the company’s ownership of a building must not be counted twice as the shareholder’s personal property. The examiner should identify the actual interest, valuation basis and any personal benefit obtained from the building. 

Control through a nominee may raise a separate disclosure question. These distinctions are particularly important where a family business predates entry into public office. The inquiry should establish what changed during the relevant period and how it was financed. Large wealth, small declared income and public office together justify careful questions; they do not supply the answers.

The public should be told how many declarations were checked, how many apparent differences were satisfactorily explained, and how many cases produced sustainable findings. A system that counts allegations as achievements will manufacture scandal. A system that records explanations and outcomes can establish whether public officeholders have accounted for their wealth.

[To be continued]

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Huzaima Bukhari, lawyer and author, has been Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE). She also served Civil Services of Pakistan from 1984 to 2003. 

Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.