Only 260,000 Out of 180 Million Citizens Have Paid Tax Consecutively For The Last 3 Years

More than 60% of Pakistan’s cabinet and two thirds of its federal lawmakers paid no tax in 2011.

The study entitled “Representation without Taxation” by investigative journalist Umar Cheema takes Pakistan’s elected leaders to task for paying little or no tax despite an estimated average net wealth of $882,000.

“The problem starts at the top. Those who make revenue policies, run the government and collect taxes, have not been able to set good examples for others,” said the report, likely to increase pressure on Pakistan to implement tax reform.

Pakistan has one of the lowest tax-to-GDP ratios in the world, estimated at 9.2%.

Only 260,000 out of 180 million citizens have paid tax consecutively for the last three years, according to the FBR.

Pakistan’s refusal to implement sweeping tax reform was instrumental in the collapse of a $11.3 billion IMF bailout programme in November 2010.

The country is one of the biggest recipients of Western aid – payouts which US Secretary of State Clinton and British PM Cameron have said are difficult to increase when Pakistan’s own elite pays no tax.

The report, which marks the launch of the Centre for Investigative Reporting in Pakistan, based its findings on information from the FBR and lawmakers themselves.

It urges politicians to disclose their tax returns voluntarily in future.

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President Asif Ali Zardari did not file a tax return in 2011 and neither did 34 of the 55 cabinet members including Interior Minister Rehman Malik.

Information was not available for one cabinet minister.

Of the 20 cabinet ministers who did pay, most made only negligible contributions, including PM Raja Pervaiz Ashraf, with Rs142,536 and Foreign Minister Hina Rabbani Khar with Rs 69,619.

The cabinet member who paid the most was Water and Power Minister Ahmad Mukhtar with Rs1.09 million.

Religious Affairs Minister Syed Khurshid Ahmed Shah paid the least with Rs 43,333.

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Among all the lawmakers in the upper and lower houses of the federal parliament, 67% failed to file tax returns in 2011; 28% did and five percent were not possible to verify, according to the report.

It also found that 78 members of parliament are still not registered with a national taxation number.

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The CIRP’s study, showing that almost 70 per cent of legislators did not file tax returns in 2011, presents a shameful scenario of parliamentarians as well as tax authorities

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According to the investigation done by the founder of the CIPR, journalist Umar Cheema and his team, “there are 104 Senators; only 38 of them filed tax returns and 65 did not. One Senator from the calamity-hit area claimed in his nomination papers that he was exempted from income tax.

Among the non-filers were 11 Senators elected in March 2012. They claimed paying taxes in 2011 in their nomination papers, however, the FBR database hosting the record of the return filers does not support their claim. Nevertheless, the tax details obtained from the nomination papers have been enlisted.

The exposure that almost 70% of legislators did not file tax returns in 2011 presents a shameful scenario. No society can even perceive that its legislators are tax cheats — for some it is nothing short of subversion of constitution. The legislators are under oath to work within the four corners of supreme law of the land and their sovereign power to levy taxes will be nullified if they commit enmasse violation of tax laws enacted by them.

The report by the CIRP claims that “in both Houses of the Parliament, the Senate and National Assembly, there are 446 lawmakers and 300 of them have turned out to be tax-dodgers.

Among them are those 88 MPs who don’t have National Tax Number (NTN), let alone paying income tax. There are 16 MNAs whose taxes couldn’t be examined due to lack of basic information like NTNs and Computerized National Identity Card (CNIC) numbers — one Senator from the calamity-hit area claimed tax exemption and one National Assembly seat is vacant” — (http://www.cirp.pk /Electronic%20Copy.pdf). If these facts are true, it calls for serious action by the political parties against their members who failed to fulfill their tax obligations. They should be expelled from the political parties and debarred from taking part in elections in future.

Clip_165The name and shame game in tax matters, however, should not be confined to the members of parliaments alone. It must cover all the powerful segments of society.

Section 116 of Income Tax Ordinance, 2001 requires filing of wealth statements and declarations of personal expenses in the prescribed manner for all individuals whose last assessed or declared income is rupees one million or more [up to tax year 2011 this limit was rupees 500,000]. It means that all persons in the service of Pakistan, holding public offices and elected representatives having this threshold of income should have filed wealth statements conforming to their declaration of assets and liabilities filed under the laws mentioned above.

The issue of tax declarations of holders of public offices and high-ranking state functionaries should be tackled democratically. There should be a bipartisan Parliamentary Standing Committee on Asset Disclosures & Investigation. The FBR should be obliged under law to convey to this committee all the declarations filed by persons holding public offices.

The committee should have powers to compare declarations filed under the Civil Servants Act, 1973, Army Act, 1952 and related rules, Representation of People Act, 1976, the Senate (Election) Act, 1975, Rule 4 of the Political Parties Rules, 2002 with those filed under the Income Tax Law. In case of any discrepancies or complaint of suppression and concealment, the committee could ask the FBR, the NAB, the FIA, MP, Military Court, as the case may be, to take action under the law.

For bringing transparency, all the political parties should be required to file their tax returns. Section 13A of Indian Income Tax Act, 1961 requires mandatory filing of returns by the political parties and Chief Election Commissioner of India instructs the Indian Central Board of Direct Taxes (CBDT) to scrutinise accounts submitted by political parties. The Central Information Commission of India also directs Income Tax Department to disclose in public interest details of donations given by political parties in their tax returns. With this information in public domain, the Commission believes there will be transparency in the funding of both small and big parties, besides checking the flow of black money in the electoral process. These elements are completely missing in our polity. Our Chief Election Commissioner should take note of this and the Parliament must amend existing election laws debarring tax delinquents from contesting elections.

The process of accountability in Pakistan must start with scrutinising of declaration of assets, liabilities and taxes paid by politicians, high-ranking civil and military officials and judges.

The FBR should be authorised under the law to publish annual tax directory (it was done only once in 1993). This step will not only expose the rich and mighty having amassed wealth without paying taxes, but also promote the much-needed tax culture.

Clip_223We all know that ignorance of law is no excuse.

A person who is unaware of a law may not escape liability for violating that law merely because he was unaware of its content – 2001 PLD 228 Supreme Court.

When about 70 percent of Pakistani legislators – members of Senate and National Assembly – were caught of violating section 116(2) of the Income Tax Ordinance, 2001 requiring filing of wealth statement and detailed personal expenses with return by every resident person having taxable income of Rs 500,000 in tax year 2011, they pleaded ignorance of law! According to them, since their only source of income was salary and allowances received as parliamentarian – one wonders how they enjoy a lavish living with this meagre source alone – and tax was deducted at source, they thought there was no need of e-filing of tax returns along with wealth statements. We will have to modify the legal maxim for our legislators: “ignorance of law is no excuse, except for its framers”!

The (FBR is equally guilty in the matter as it was the statutory responsibility of the concerned Commissioner(s) in such cases of non-compliance to issue notices under section 114(3) and 116(1) of the Income Tax Ordinance, 2001. As the matters relates to holders of public office (apparently living beyond means), it was also a congnizable offence for which investigations should have been made by FIA and NAB under their respective laws. None of these institutions has taken any action till today. The entire episode is a sad reflection of the prevalent ugly state of affairs in Pakistan where the mighty sections of society give a damn to rule of law and state functionaries are hesitant to proceed against them for fear of repercussions or losing of favours – the key appointments are made on political considerations than on merit.

The issue of blatant violation of rule of law is not confined to our parliamentarians. The ashrafiya (elites) – comprising militro-civil-judicial bureaucracy, landed aristocracy, industrialist-cum-politicians, oligarchy of religious and spiritual leaders (ulema and pirs), media tycoons and their powerful anchors – flout law of the land with impunity and take pride in it – for them it is a show of powerfulness. The problem starts from to the top-when matter comes to spending by the highest judicial organ, it takes cover of special laws and shows defiance of summons issued by the Public Accounts Committee. The critics say if everything is according to law, why to hide behind technicalities. If some powerful men are involved, special commissions are constituted restraining the investigation agencies to perform their duties. They blow hot and cold in the same breath – when it is suitable they praise the same agencies for excellent work.

If assets and tax declarations of powerful militro-civil-judicial hierarchy are not made public, how the citizens will know how much state land was given to them on throwaway prices and whether they paid tax as envisaged in section 13(11) of the Income Tax Ordinance, 2001 for this and other similar favours at taxpayers’ expense. This is the stark reality of today’s Pakistan – the legislators make mockery of laws enacted by them and the mighty militro-civil-judicial bureaucrats hide behind special laws!

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