Ministers, lawmakers evading tax: study

December 13, 2012

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ISLAMABAD, Dec 12: At a time when the government is persuading people to pay more taxes, a majority of lawmakers, including members of the federal cabinet, paid no taxes at all last year, a study reveals.

According to the study, ‘Representation without Taxation’, 34 ministers out of 54 did not file tax returns in 2011. The study was launched at the National Press Club on Wednesday.

President Asif Ali Zardari also did not file tax returns.

Deputy Prime Minister Chaudhry Pervaiz Elahi, Interior Minister Rehman Malik and Commerce Minister Makhdoom Amin Fahim were among the prominent cabinet members who did not file returns. Mr Fahim does not even possess a national tax number (NTN).

Data compiled by the Centre for Peace and Development Initiatives (CPDI), in coordination with the Centre for Investigative Reporting Pakistan (CIRP), showed that Railway Minister Ghulam Ahmad Bilour, who had recently announced $1 million head money for an Egyptian-American producer of a blasphemous film, did not pay income tax.

Introducing the report, Amer Ejaz, CPDI executive director, said that Pakistan had a very low tax-to-GDP ratio, which has been stagnant at around nine per cent for a decade.

“Even Ethiopia has an over 10 per cent tax-to-GDP ratio,” he said, adding that one of the key reasons for this situation was that the lawmakers had never bothered to improve their tax record.

Mr Ejaz said under the regulations it was mandatory for everybody having annual income of more than Rs500,000 to file income tax returns electronically.

“Even though their income tax is deducted at source but by not filing the returns the parliamentarians are actually flouting the regulations,” he added.

Mr Ejaz said that the study had focused on flawed and careless tax filing practices of the parliamentarians because they were the ones who made laws.“It is strange that tax data are still classified information and once they are made public the country’s tax-to-GDP ratio will improve automatically.” He said it could only be made mandatory for bureaucrats and military officers to declare their assets and tax data about then could be made public if parliamentarians filed tax returns.

The study highlights that non-filing also supports hiding of other assets which are subject to income tax.

Only 17 PPP senators, six PML-N senators, four MQM senators, two each of ANP and PML-Q and one each of BNP-A, JUI-F and the PML-F filed income tax returns in 2011.

Of the 341 members of the National Assembly, only 90 filed income tax returns.

Only 35 out of 126 MNAs belonging to the PPP, 27 out of 92 PML-N MNAs, 16 out of 52 PML-Q MNAs, seven out of 25 MQM MNAs, 2 out of 19 independent MNAs and one each of ANP, NPP, PML-F MNAs filed tax returns.

Former prime minister Yousuf Raza Gilani and his 25 cabinet members had acknowledged in their nomination papers for the 2008 general elections that they did not pay anything as income tax.Mr Gilani registered to pay tax in July 2010.

Aitzaz Ahsan of the PPP (Rs12.97m), independent Abbas Khan Afridi (Rs11.52m), Talha Mehmood of the JUI-F (Rs7.60m), Farogh Naseem of the MQM (Rs4.56m) and Osman Saifulah Khan of the PPP (Rs1.79m) are among the top taxpaying senators.

Jehangir Khan Tareen of the PML-F (Rs17.05m), Hamid Yar Hiraj of the PML-Q (Rs2.44m), Hamza Shahbaz of the PML-N (Rs2.31m) and Attiya Inayatullah (Rs1.59m) and Humayun Saifullah Khan of the PML-Q (Rs1.44m) are top five taxpaying MNAs.About one-fourth of MNAs who had filed tax returns belonged to Sindh and Punjab and 10 per cent to Khyber Pakhtunkhawa. In Balochistan’s the number dropped further.

POOR SUBSIDISE RICH: The report quoted a former FBR chairman, Riyaz Hussain Naqvi, as describing the tax system as a skewed one in which the poor subsidise the rich. “This is a system of the elite, by the elite, and for the elite.” Mr Naqvi had said.

The exclusivity of data highlighted in the study is that the tax details are not public document, which are not released by the FBR.

However, the study has miscalculated a lacuna in the tax collection system because a large number of legislators belong to agricultural class and the provinces are authorised under the law to implement the income tax on agriculture income.

AFP adds: “The problem starts at the top. Those who make revenue policies, run the government and collect taxes, have not been able to set a good example for others,” said the report.

There was no immediate reaction from top politicians, although a spokesman for the PML-N said it was up to the FBR to take action against any evaders.

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

Of the 20 cabinet ministers who did pay, most made only negligible contributions, including Prime Minister Raja Pervez Ashraf, with Rs142,536 and Foreign Minister Hina Rabbani Khar with Rs69,619.

The cabinet member who paid the most was state minister for commerce, Abbas Khan Afridi, who paid Rs11.5m last year. Religious Affairs Minister Syed Khurshid Ahmed Shah paid the least _ Rs43,333.

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

It also found that 78 members of parliament still did not have a national taxation number.

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

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 urged politicians to disclose their tax returns voluntarily in future.

“We have standing instructions to our party leaders and officials to pay tax and to uphold the supremacy of law. But you cannot force an individual,” PML-N spokesman Mushahidullah Khan told AFP.

“We will bring reforms to our tax system when we come to power,” he added.