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
