Half of lawmakers say they do not pay tax

Big donors such as Britain, which has committed more than $1 billion to education in Pakistan, are considering slashing aid unless more rich Pakistanis pay tax

Nearly half Pakistan’s lawmakers reported they paid no taxes, according to a study released on Monday, findings that may endanger billions of dollars in IMF and other loans and aid that shore up a faltering economy.

Cracking down on rampant tax evasion is a main condition of a $6.7 billion International Monetary Fund programme aimed at stabilising the nuclear-armed US ally of 180 million people.

Big donors such as Britain, which has committed more than $1 billion to education in Pakistan, are considering slashing aid unless more rich Pakistanis pay tax.

The report, which identifies some ministers among lawmakers who pay no tax, was drawn up by the Center for Investigative Reporting in Pakistan, an independent research group. The group based its report on documents from the Election Commission, which publishes financial declarations of political candidates and their statements from the tax authority.

Tariq Azeem, a spokesperson for Prime Minister Nawaz Sharif’s ruling party, said the tax authorities and the Election Commission used different forms to gather tax data. He said that may explain the discrepancies.

Asked why some legislators appeared never to have registered with tax authorities, Azeem said: “I don’t know.”

Spokespersons for other political parties said they had not read the report and could not comment.

None of the politicians the report identified as tax evaders was available for comment.

Public schools and hospitals are starved of revenue while riots over poor public services are frequent. Militant groups capitalise on anger to build support.

Pakistan has a nine per cent tax to gross domestic product ratio, one of the world’s lowest. Fewer than one per cent of citizens file income tax returns. Legislators have a tiny amount deducted from their official salaries but almost all of them have lucrative second careers. The average net worth of a legislator in 2010 was $800,000, according to a study of their asset declarations by the Pakistan Institute of Legislative Development and Transparency (PILDAT).

More recent figures are not available.

“If politicians don’t pay taxes themselves, they have lost the moral authority to impose taxes on others,” said Umar Cheema, the author of the report.

“Serious action”

Finance Ministry Ishaq Dar has claimed that the December tax collection was up by about a quarter compared with last year. Cheema said that nearly 80 per cent of that was through indirect taxes on items like fuel.

“Whenever there is pressure from the donor agencies, they just increase indirect taxes which shifts the burden onto the poor and lets the rich off again,” Cheema said.

Nearly half of all national and provincial legislators did not declare paying any taxes, Cheema said in his report.

More than one in 10 legislators had never even registered with tax authorities. Of those who paid, a third had discrepancies between income and tax declarations and data provided by tax authorities.

Many legislators reported paying minuscule amounts of tax. Many paid less than $100, while some paid as little as $17. There was even a discrepancy in the record of Prime Minister Sharif, according to the report.

Sharif, who came to power in a May election, declared he paid $26,000 in income tax last year although the Federal Board of Revenue said he paid $22,000. The prime minister’s office was not immediately available for comment.

“We expect everyone to be honest and forthcoming, that goes without saying, but there is no such thing that they have to verify with (party) headquarters. It is an individual’s own business,” said Azeem, the party spokesperson. “If we find anyone has knowingly misled income tax authorities, we will take serious action.”

Asked what action, Azeem said: “It depends.”

Tax ‘innocence’

As clamour grew over tax returns not being filed by parliamentarians, some took to twitter to declare their “innocence” and present proof that they had filed their taxes.

Pakistan Tehreek-e-Insaf (PTI), which had included accountability and public declaration of incomes and assets in its election manifesto, its members announced that they had filed their tax returns.