THE financial wizards and tax managers in the ministry of finance and Central Board of Revenue (CBR) have been claiming that the tax base is narrow and that the majority of people do not pay taxes. The reality is quite the opposite. The citizens are heavily taxed. Out of the total population of those earning taxable income, 80 per cent are paying tax at source or through voluntary filing of returns.

In most cases, the tax deducted/collected at source is the full and final discharge of liability; hence the taxpayers do not file statements (required under section 115(4) of the Income Tax Ordinance, 2001), which has created a wrong impression that our income tax base is narrow.

The income tax department collected Rs4.766 billion in income tax during the financial year 2003-04 from 10 million bank account holders (who maintain Profit and Loss Sharing Accounts [sic]), Rs4.518 billion from four million commercial and industrial electricity users and Rs3.757 billion from over ten million mobile users. And yet they say our tax base is narrow!

For a long time now, we have been apologetic (specifically before the IMF and the World Bank) that the total income tax payers (registered) in Pakistan are just over one million in a population of 140 million. This is a myth. The reality is that since July 1, 1992, all commercial electricity consumers (including about 3.2 million retail outlets in urban areas) are paying minimum income tax of Rs60 per month (since 1/7/96 and prior to that Rs30 per month) and maximum of Rs720 per month (since 1/7/96 and prior to that Rs360 per month).

As of March 2005, the total number of electricity consumers (Pakistan Economic Survey 2004-05) was 14.7 million, out of which industrial and commercial consumers are not less than four million. It means that during 2004-05, the total number of persons who paid income tax under section 235 of the Income Tax Ordinance, 2001 is not less than five million.

In its Yearbook 2003-04, the CBR has admitted that tax collection from telephone/mobile and electricity users and transport owners during the financial year 2003-04 was over Rs8 billion.

The total number of mobile subscribers in April 2005 were 10,545,303 (Economic Survey 2004-05) and all of them were obliged to pay income tax with the bills or on pre-paid cards.

These figures explode the myth that the income tax base is narrow. The citizens are accused of not paying income tax, whereas the reality is that even a petty shopkeeper in a village (whose total income is much below the minimum taxable limit of Rs100,000) is paying Rs720 per annum in the current financial year. On the contrary, the big landlord of his village — who is earning millions — is not paying even a single penny as personal income tax. The total population, according to the Economic Survey 2004-05 in mid-2004 is 152.53 million. The percentage of rural population is 66.5 per cent. Out of the total population, 43.1 per cent are below the age of 15 years (they are not income earners, hence cannot be taxpayers).

The total labour force employed stands at 40.38 million, out of which 25 million is rural labour force. Reading all these facts together, the income tax paying population, who have a taxable income of Rs100,000 during the tax year 2005, cannot be more than 15 million.

Out of total taxpaying population of 15 million, nearly 10 million are already paying income tax at source under various sections (section 148 to 156A, sections 231A, 234 to 236 of the ordinance), yet the CBR and the government are engaged in a propaganda that people are not paying taxes and that our income tax base is very narrow!

The reality is that people are over-taxed, but they get nothing in return. Successive governments have failed to fulfil even their basic obligation of safeguarding the life and property of citizens, not to talk of providing them basic facilities of health, education, water and other civic amenities.

The citizens have been making a substantial contribution under the income tax regime and do not even claim the refunds by filing returns. Without taking into account this fact, the CBR has been claiming that the total number of income tax payers is just over one million.

It is the duty of the CBR to allot national tax numbers (NTNs) to all those who paid tax under sections 148, 149, 150, 151, 152, 153, 154, 155, 156, 231A, 233, 234 and 235 of the ordinance, rather than waiting for their statements under section 115(4) of the ordinance.

Had the CBR done this by just collecting the names and particulars of commercial electricity consumers from WAPDA and telephone/mobile users from Pakistan Telecom and mobile companies, today we would have over six to eight million registered taxpayers. Had they brought to the tax rolls every account holder of banks, in whose case tax was deducted under section 151 of the ordinance, this figure could have been as high as 10 million.

The taxpayer is not the one who files returns/statements, but a person who pays tax under the ordinance (see section 2[66][c]). How can the CBR blame the public at large for its own pathetic performance? Though taxpayers paid Rs175 billion under income tax alone in 2004-05 (the figure was just Rs40 billion in 1993-94), yet instead of getting credit for it, they have been dubbed as tax evaders.

On the other hand, governments have miserably failed to cut their wasteful expenditure on personal perquisites and benefits. Defence and debt service alone are eating up a substantial chunk of tax revenue. Are the people of Pakistan responsible for this mismanagement of state affairs?

Out of total collection of Rs175 billion under income tax during 2004-05, the percentage of withholding taxes and voluntary payment is about 87 per cent. The CBR’s own efforts in income tax collection are just to the extent of 13 per cent of total collection.