by Huzaima Bukhari & Dr Ikramul Haq
On Nawaz Sharif’s becoming PM for the third time, many predicted that there would be remote chances of enforcing tax laws as Pakistan Muslim League-Nawaz had a proven track record of appeasing traders and protecting tax evaders. Their prediction proved correct when in September 2013, the finance minister proudly announced that “all demands of traders are accepted”. With this announcement and tax amnesties personally announced by the premier for non-filers, the authority of the Federal Board of Revenue (FBR) further eroded. As in the past, the traders are neither ready to file income tax returns nor pay retail sales tax.
The official spokesperson for the FBR on March 21, 2014, while speaking at a workshop in Karachi, revealed that “no encouraging response has so far been received for the tax amnesty scheme announced by the prime minister due to lack of stakeholders’ interest”. It is shocking that only 3000 people have so far availed this scheme paying a partly amount of Rs88 million. For obvious reasons, the FBR’s spokesman could not boldly concede that the real culprits for the failure of the scheme were traders. Despite extending deadline of amnesty scheme from February 28, 2014 to April 30, 2014, defiant traders are least pushed to avail it.
Tax culture and huge untaxed business empires — generating money power essential for winning elections in Pakistan — cannot co-exist. The rich and powerful keep assets worth billions of rupees abroad. For electioneering, they get generous donations from business magnates and after winning pay back through tax amnesties and concessions through statutory regulatory orders (SROs). Together they make billions through rent-seeking, including tax evasion, and remit the major portion abroad. Traders who invest billions in property in Pakistan and places like Dubai pay negligible income tax.
According to the FBR’s own study, the contribution of traders in income tax is just 0.5% and in sales tax about 1%. Like powerful absentee landlords, the traders pay meagre income tax. However, they successfully keep revenue authorities at bay due to powerful political influence they wield. The legislative history of income tax law is fraught with provisions that were amended and/or re-amended on account of the bazar’s shutter-down threats or violent demonstrations by traders, causing legislators to get cold feet and succumbing to their demands.
The accumulation of wealth and hoarding goods are prohibited in Quran, yet traders are told that expanding fortunes beyond any limit is permissible in Shariah. The governments — civil and military alike — have been extending amnesty schemes to tax evaders to whiten their undeclared incomes and ill-gotten wealth. For example, some of such schemes are Self-Assessment Schemes of the 1970s, Special National Fund Bonds or Simplified Self-Assessment Scheme of the 1980s, Foreign Currency Accounts or Foreign Exchange Bearer Certificates of the 1990s, various other millennium immunity schemes and the infamous section 111(4) of the Income Tax Ordinance, 2001.
The question that emanates from this state of affairs is why traders have been defiant to file tax returns and pay sales tax? There cannot be any one definitive answer because the matter goes down to innumerable factors having roots in worldly and religious motivations. The sanctity to make unrestrained profits by traders has authority of Mullah-monopolised-Shariah.
The accumulation of wealth and hoarding goods are prohibited in Quran, yet traders are told that expanding fortunes beyond any limit is permissible in Shariah. Resultantly, the greed to amass wealth becomes an obsession violating all social and moral obligations. Thus, adulterating eatables, incorrect measurements, selling defective or sub-standard products, misrepresenting, providing unprofessional services, defrauding customers, refusing to honour guarantees or other duties as abiding by governmental laws regarding trade or payment of taxes, nothing is considered immoral or violation of laws. All is fair, as long as one is able to stuff one’s pockets with paper money and then have the audacity to squander it in ostentatious display of wealth and power. Such behaviour is visible in the length and breadth of our entire society.
Apart from an ignorable number, the majority of traders — from a petty fruit/vegetable vendor to owner of large departmental stores — leave no stone unturned to swindle an unassuming customer as well as the concerned government agents with whose connivance they easily manage to evade their national duties.
Traders get immense support from religion, as propagated by Mullah, for not paying taxes. It is common knowledge that majority of trading class regularly participates in religious congregations. Praying five times a day, fasting, frequently performing Umrah and Haj [pilgrimage], spending substantially on sacrificial animals during Eid-ul-Azha, joining the Tableeghi ijtemah [annual congregations of the Tableeghi Jamaat] etc, are their hallmarks.
Performing rituals is considered obligatory by traders because Mullah preaches that all sins would be forgiven in return for these. Fulfilling obligations towards state and fellow human beings is not emphasised with the same zeal. Traders who evade taxes with impunity dole out generous donations to madrassahs [religious schools] and mosques. They are convinced that these would ensure an easy passage towards their ultimate and eternal abode — Jannah [paradise].
Non-compliance of tax obligation is a grim reality of Pakistan. State has failed to fulfil its basic obligations — protection of life and property, health, education, housing and transport etc — towards citizen. In primary education, madrassahs have overtaken the state-run institutions. The overwhelming enrollment is in private non-religious institutions, but enrollment in madrassahs is on increase — sees details in http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-3521.
Once the fulfilment of civic and social duties, respect for humanity, tolerance and respect for law have been an integral part of the primary school curriculum. It is now unfortunately replaced with ‘we are the best’ syndrome. Since the days of General Ziaul Haq, the moral life of common man is inflicted by clergy’s view that this world is a temporary place where defying laws and rules of the state is not a vice but not paying chanda (donation) to them is an unforgivable sin. They do not advise the wealthy to establish wakfs for public welfare — once these were hallmarks of Muslim society to look after the less privileged.
In our peculiar milieu, the governments need to educate the masses through the same platform that is used by clergy. The mosques should be under state control, headed by trained teachers who are adequately paid — the same model exists in majority of Muslim countries. Primary education should start from mosques. This would help ensure educated and promising generations showing tolerance towards all, obedience to law and rules, paying government dues and most importantly, fulfilling duties as responsible citizens.
The trader-mullah nexus for non-payment of taxes and huge amounts extracted for madrassahs are issues that need to be debated and handled democratically. These are critical for our existence as a democratic country lest we continuously slide towards mullocracy that is regressive and destructive for humanity.