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Tax, lies and red tape
By: Huzaima Bukhari & Dr Ikramul Haq

At a time when
Pakistan is facing the worst ever political standoff, the federal
information minister in a press conference on November 27 accused the
chairman of the Pakistan Tehreek-e-Insaf, Imran Khan, of massive tax
evasion.

He showed Imran’s tax returns for the year 2013 wherein
allegedly agricultural income tax of Rs500,000 appeared as payable,
Rs8.4 million as income from services abroad and cash in hand of Rs10.30
million. The information minister was furious that Imran did not
disclose sources of “foreign income” and that “huge cash in hand as on
June 30, 2013 was questionable.”

In retaliation, supporters of
Imran Khan dubbed the information minister and the majority of the
elected members of the PML-N as ‘tax chors’ (tax evaders) and looters of
public money.

It is strange that the government, instead of
taking action against ‘tax evaders’ is using it as political ploy
against adversaries. It is the duty of the state – precisely the Federal
Board of Revenue – to take action against tax delinquents without any
political affiliation. Failure to do so amounts to abetment in tax
evasion, punishable under law.

A report, ‘Taxation by
Misrepresentation’, released jointly by the Centre for Investigative
Reporting in Pakistan (CIRP) and Sustainable Development Policy
Institute (SDPI) in 2013, revealed that “out of 1,070 lawmakers voted to
the national and provincial assemblies in the 2013 elections, 47
percent did not pay income tax and 12 percent of these members do not
have a National Tax Number (NTN).” The PML-N has the lion’s share with
54 such MNAs. The PTI follows with 19 non-taxpaying MNAs.

In its
earlier report of 2012, ‘Taxation without Representation’, the CIRP
exposed that “in both houses of parliament, the Senate and the National
Assembly, there are 446 lawmakers and 300 of them have turned out to be
tax-dodgers.” Sadly, it did not move the Election Commission of Pakistan
(ECP) or the apex court to disqualify them as per the law. Resultantly,
in tax year 2013 as many as 60 percent members of parliament again
failed to file returns within time, while the number for tax
administrators who failed to do so was 1020 even though out of about
23,000 employees of the FBR 13,000 had taxable salaries.

The tax
directory available on the FBR website reveals that none of the 1,072
legislators – members of Senate, national and provincial assemblies –
was among the top taxpayers of the country. The cumulatively amount they
added to the national exchequer was Rs251 million – just 0.03 percent
of the total direct tax collection whereas their average net worth is
$900,000.

The taxation system is one of the fundamental elements
of a constitutional democracy. Questions such as who is to be taxed,
how much and for what purposes are constitutional issues to be settled
by the legislators. If elected members and tax administrators do not
discharge their tax obligations, the entire system is discredited – as
is the case in Pakistan.

The name-and-shame game in tax evasion
should not be confined to members of parliament alone. It must cover all
segments of society. The reports of CIRP/SDPI are only restricted to
parliamentarians; they should conduct similar studies for high-ranking
state functionaries, men in khaki and the mufti.

The issue of
tax declarations of holders of public offices and high-ranking state
functionaries should be tackled democratically. It must be probed by a
joint Parliamentary Standing Committee on Asset Disclosures &
Investigation representing both houses and all parties. The FBR should
be obliged under law to convey to this committee all declarations filed
by persons holding public offices. The committee should have the power
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
FBR, NAB, FIA, MP – as the case may be – to take action under law.

In
Pakistan the process of accountability must start with scrutinising
declaration of assets, liabilities and taxes paid by politicians,
high-ranking civil and military officials and judges. Civil society and
the media should come forward to force parliament to abolish all laws
relating to secrecy and/or immunity and enact comprehensive legislation
for obtaining information by any citizen under the freedom of
information law. This step will not only expose the rich and mighty who
have amassed wealth and have failed to pay taxes under the law, but will
also help promote a much-needed tax culture.

It is a matter of
record that political parties in Pakistan do not file tax returns and
the FBR has never bothered to issue them notices. In India, there is a
mandatory provision of law – section 13A of the Income Tax Act, 1961 –
requiring political parties to file returns. Every year, the chief
election commissioner of India asks the Indian Central Board of Direct
Taxes to scrutinise accounts submitted by political parties. The Central
Information Commission of India also directs the income tax department
to disclose, in public interest, details of donors provided by political
parties in their tax returns. With this information in the public
domain, Indians ensure transparency in the funding of both small and big
parties, besides checking the flow of black money in the electoral
process.

In Pakistan, neither the ECP nor the FBR has bothered
to consider this vital matter till today – even the Supreme Court has
never taken suo motu cognizance of this issue although it relates to the
fundamental right of vote and information necessary for free and fair
elections.

The writers, tax lawyers, are visitingprofessors at Lahore University of

Management Sciences (LUMS).

Email: info@huzaimaikram.com

Source : http://www.thenews.com.pk/Todays-News-9-287856-Tax-lies-and-red-tape

This article was originally published at:

The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.