WHISTLE BLOWING - AN INSIDE BARK

 Introduction

We lives in a complex world, the evidence is that our world is full of humans. Every day, decisions are made that can affect our health, safety, economic and human rights. Some of these decisions are made for the worst reasons. They are made by the corrupt, the incompetent or the lazy. Accidents happen or corruption flourishes because employees who know about wrongdoing are afraid to say anything in fear of losing their jobs.

The Objectives:

The objective of the paper in your hands is to consider how far we have advanced towards the consciousness of a significant ethos of revelation. The consciousness of a significant ethos of revelation requires an empowering whistleblowing legal framework, meaningful implementation and enforcement within all organisations especially in the Public Sector Entities, bringing up the practices and protections provided in terms of the laws essentially and as well as the social culture which yield respect to the whistleblower.

Before getting in depth in it let us clear in our mind that what actually is Whistle Blowing?

·         US academics – Marcia P.

Act of disclosure of illegal activities.

·         UK academics –Guy Dehn

Act of disclosure to reduce and remove risks.

·         Australian academics–– Peter Jubb

Act of disclosure to rectify a wrongdoing.

·         Oxford English Dictionary

Bringing an activity to a sharp conclusion as if by the blast of a whistle.

·         UK Committee on Standards in Public Life

Raising a concern about malpractice within an organisation or through an independent structure associated with it.

·         Chambers Dictionary

Giving information (usually to the authorities) about illegal or underhand practices.

·         US, Brewers Dictionary

Exposing to the press a malpractice or cover-up in a business or government

(origins) Police officer summoning public help to apprehend a criminal; referee stopping play after a foul in football.

Here actually we are talking about an effective system in place that allows ways of disclosure by any person of any information about misconduct, corruption, misuse of powers, misappropriations or illegal activity etc. which may leads towards some sort of protection as well as some kind on incentives to the whistle blower in order to promote accountability.

There are few countries in the world which have adopted Whistle Blowing National Laws a few are as under:

·         US - Whistleblower Protection Act

·         UK - Public Interest Disclosure Act

·         Canada -  Public Servants Disclosure Act

·         Japan - Whistleblower Disclosure Act

·         New Zealand - Protected Disclosures Act

·         Romania - Act on the Protection of Whistleblowers

We also have following United Nations International Instrument on Whistle Blowing:

·         Convention against corruption in 2003

·         Convention against corruption in 2005

·         140 countries have signed for as of 2011

Whistleblowing is relevant to all organisations and all people, not just those few who are corrupt or criminal.  This is because every business and every public body faces the risk of things going wrong or of unknowingly harboring a corrupt individual.  Where such a risk arises, usually the first people to realize or suspect the wrongdoing will be those who work in or with the organisation.  Yet these people, who are best placed to sound the alarm or blow the whistle, also have most to lose if they do.

"There are obvious tensions, public and private, between the legitimate interest in the confidentiality of the employer's affairs and in the exposure of wrong. The enactment, implementation and application of the "whistleblowing" measures and the need for properly thought out policies in the workplace, have over the last three years, received considerable publicity from various quarters, including the valuable activities of an independent charity, Public Concern at Work, established in 1993 and experienced in providing assistance to both  employers and employees."

Lord Justice Mummery - giving the judgment of the Court of Appeal - in its first consideration of the Public Interest Disclosure Act.  (ALM Medical Service v Bladon (2002) IRLR 807)

The dilemma

In practical terms, if someone is concerned about corruption or serious wrongdoing in or by an organisation, they have three options.  These are

• To stay silent.

• To blow the whistle internally or with the responsible person.

• To blow the whistle outside to the authorities or the media.

Silence

Silence is the option of least risk both for the individual worker and for a responsible firm which comes across corruption.  It will be attractive for many reasons.  The whistleblower will realise that his or her facts could be mistaken or that there may be an innocent explanation. Where colleagues or competitors are also aware of the suspect conduct but stay silent, the whistleblower will wonder why he or she should speak out.  In organisations where labour relations are adversarial and in cultures where corruption is common, the whistleblower is likely to assume that he or she will be expected to prove that the corrupt practice is occurring, rather than see those in authority investigate and deal with the matter.  Even though he or she has no control over it, the whistleblower may feel responsibility for any action that may be taken against the wrongdoer.  Finally, unless the whistleblower believes there is a good chance that something will be done to address the wrongdoing, it is almost inevitable that he or she will stay silent.

Even if he or she thinks the alarm should be sounded, the whistleblower will want to consider his or her private interests before taking action.  Without reassurance to the contrary, the whistleblower will fear reprisals be it harassment or dismissal.  The whistleblower may also suspect (rightly or wrongly) that the corruption involves, implicates or is condoned by more senior people in or outside the organisation, in which case he or she will fear the matter will be covered up.  Even where these obstacles are overcome or reduced, the whistleblower will fear that he or she will be labelled as disloyal by the generality of colleagues whose respect and trust the whistleblower may want or need in future.

The results of this culture of silence are that:

·         responsible employers are denied the opportunity to protect their interests;

·         unscrupulous competitors, managers or workers are given reason to believe that ‘anything goes’;

·         society focuses more on compensation and punishment than on prevention and deterrence.

Problems in whistleblowing

Whistleblowing always involves two parties with opposing rights and interests; on the one hand there is the whistleblower who has a right to equality, freedom of expression and fair labour practices; and on the other hand there is the organisation against which an allegation is made which has rights to a reputation and to loyalty from staff.

Wind of Change

There is growing acceptance to whistleblowing.  With the changing nature of employment, globalisation and the increased flow of information, there is also a recognition that the traditional approach of trust and confidentiality in the workplace cannot be relied upon to operate as it did through much of the 20^th century.  While trust and confidence is of critical importance in any community or organisation, to be effective it cannot be blind or unquestioning.  Whistleblowing cultures which emphasise internal reporting are a means by which the abuse of trust and confidence can be checked and by which asymmetrical accountabilities of those within the workplace can be understood and developed. If the organisation is prepared to promote and implement such a culture, any risk of it being hijacked by petty campaigns will be minimised, if not removed.

Whistleblowing as a means to deter wrongdoing, promote transparency and good governance, underpin self-regulation and maintain public confidence.  It is the approach which has been put on a legislative footing in the UK and in South Africa in recent years.

ESSENTIALS

Essential 1 - Create an Anti-Fraud Policy

·         Outline an anti-fraud culture

·         Outline the need for accountability

·         Outline reporting mechanisms

·         Outline the owners of the process

·         Outline the authority of these owners

Essential 2 - Create Case Management Framework

·         Outline incidents criteria

·         Outline incidents level

·         Outline incident response teams

·         Outline investigative process

·         Outline evidence retention timeline

Essential 3 - Create a dedicated department

·         Legal experience

·         Forensics Accounting experience

·         IT Forensics experience

·         Fraud experience

Essential 4 - Get endorsements from the top

Essential 5 - Get endorsements from Clients

Essential 6 - Awareness, Awareness, Awareness!

·         The policy

·         Anti-fraud culture

·         The department

Essential 7 - Investigate and Take Action

·         Investigate incidents reported

·         Take action on the incidents reported

Essential 8 - Protect the Whistle Blower

Essential 9 - Reward the Whistle Blower

Essential 10 - Encourage anonymity

Essential 11 - Assess and evaluate the system

·         Is it working

·         Is it yielding the intended results

·         Are employees comfortable using it

·         Are employees using it

Five Factors to Success

1.      Protection

2.      Reward

3.      Taking Action

4.      Showing Action

5.      Confidentiality

Let’s Agree

·         That Fraud is here to stay

·         That we need whistleblowers

·         That we need whistle blowing system

Recommendations

1.      There is a need to develop a consolidated and consistent whistleblowing framework that provides equal protection to all whistleblowers and which imposes the same effective duties on organisations, in both the public and private domains, to promote a culture of disclosure that protects whistleblowers.

2.      The law must be made comprehensive in the provision of an expanded scope of protection.

3.      It must draw all potential whistleblowers into its protective field and allow disclosures to any person or agency that is able to do something about the allegation concerned.

4.      Organisations may be via Audit Committees must be compelled and/or encouraged to proactively promote a culture of disclosure, adopt more appropriate and expansive interpretations of the whistle blowing related guidelines, and to be more pro-active and attentive to effective implementation of obligations and protections provided by the guidelines at least until it got legislative cover/security.

Brief note on Sales Tax

Brief History of Sales Tax

Sales Tax was a provincial subject at the time of partition. It was being administered in the provinces of Punjab & Sindh as provincial levy. Sales tax was declared a federal subject in 1948 through the enactment of General Sales Tax Act, 1948 and in 1952, this levy was transferred permanently to the Central Government. Sales tax was levied at the standard rate of 6 pies per rupee at every stage whenever a sale was effected. The trading community protested against this system, and this resulted in the enactment of Sales Tax Act 1951.

A system of licensed manufacturers & wholesalers was instituted whereby they were allowed to purchase goods free of sales tax from each other and pay tax on sales to unlicensed traders. Imports were chargeable to Sales Tax but the licensed manufacturers & wholesalers were allowed to import goods without the payment of Sales Tax. Later on Sales Tax became chargeable on locally produced & imported goods at the time of their sales & import, respectively. The sales tax, was collected under the Finance Ordinance, 1956, on goods which were chargeable to Central Excise Duty, as if it were a duty of Central Excise. In April 1981, by virtue of an amendment in the Sales Tax act, 1951, the collection of Sales Tax on non-excisable goods was also entrusted to the Central Excise Department. 

In the late eighties the government decided to replace Sales Tax with the Value Added Tax in the country as a part of its structural adjustment program which was undertaken to correct anomalies & distortions both in our tax & non-tax regimes. Accordingly new enactment titled Sales Tax Act 1990 replaced Sales Tax Act 1951 with effect from 1-11-1990.

Liability to Sales Tax

Following sectors are required to get registration for sales tax and charge sales tax on their supplies/ services:

• Manufacturing
• Import
• Services

Distribution, Wholesale & Retail stage.

Previously it was being charged at the manufacturing & import stage, and its scope has been extended now to remaining sectors.

Sales Tax is chargeable on all locally produced and imported goods except computer software, poultry feeds, medicines and unprocessed agricultural produce of Pakistan and other goods specified in Sixth Schedule to The Sales Tax Act, 1990.

Registration

Every person in sectors mentioned above, who makes a taxable supply in Pakistan is required to be registered under the Sales Tax Act. However, manufacturers having taxable turnover below five million rupees and also utility bill below Rs. Seven lac during the last twelve months are exempted from registration and payment of sales tax. Similar exemption is also available to retailers having total turnover below Rs. five million in the last twelve months.

The rate for sales tax is 16% of value of supplies. However, there are some items which are chargeable to sales tax at 18.5% or 21% of value of supplies (see SRO 644(I)/2007 as amended by SRO 537(I)/2008 dated 11th June 2008) 

The Registration Form(s) are submitted to the Central Registration Office, FBR, or Sales Tax Collectorates/ RTOs for the allotment of a Registration Number by the persons liable to be registered under the Sales Tax Act. The taxpayer is then issued a Certificate of Registration.

Returns

As per law each registered person must file a return by the 15th of each month regarding the sales made in the last month. 

All registered persons are required to file returns electronically and in such cases the payment is to be made by the 15th and return can be submitted on FBR’s e-portal by 18th. 

Detailed procedure in this respect is given in Sales Tax General Order no. 04 of 2007. 

There are some sectors which are required to file returns on quarterly (tri-monthly) basis e.g. retailers including dealers of specified electric goods and CNG dealers.

Maintenance of Records

All registered persons are required to maintain records at their business premises of the goods purchased and supplied made by them. All the records are required to be kept for a period of 5 years.

Refunds of Sales Tax

In cases where the Input Tax exceeds the Output Tax due from the registered person in respect of a tax period because of exports or other zero-rated supplies, the excess amount of input is refunded back to the taxpayer within 45 days. In all other cases of excess input tax, the Board can specify the procedure for refund.

Additional Tax

If a registered person does not pay the tax within the specified time or claims a tax credit or refund which is not admissible to him, or incorrectly applies the rate of zero percent to the supplies made by him, he has to pay the additional tad at the following rates: 

One and half percent of tax due or the part thereof per month; 

However, in case of tax fraud, the rate of additional tax shall be two percent per month.

Arrears

The work regarding Arrears gets initiated in the following cases:

• Late or no submission of the Returns
• Amount paid is less than the tax amount payable

A demand raised after an audit/ scrutiny is upheld after adjudication.