Report unmasks tax evasion by Pakistani leaders

December 13, 2012 - 7:21:37 am

ISLAMABAD: More than 60 percent of Pakistan’s cabinet and two thirds of its federal lawmakers paid no tax last year, according to a report released yesterday on tax evasion among the country’s political leaders.

The study entitled “Representation without Taxation” by investigative journalist Umar Cheema takes Pakistan’s elected leaders to task for paying little or no tax despite an estimated average net wealth of $882,000.

“The problem starts at the top. Those who make revenue policies, run the government and collect taxes, have not been able to set good examples for others,” said the report, likely to increase pressure on Pakistan to implement tax reform.

There was no immediate reaction from top politicians, although a spokesman for the main opposition Pakistan Muslim League-N party said it was up the Federal Board of Revenue (FBR) to take action against any evaders.

Pakistan has one of the lowest tax-to-GDP ratios in the world, estimated at 9.2 percent. Only 260,000 out of 180 million citizens have paid tax consecutively for the last three years, according to the FBR.

According to the findings, President Asif Ali Zardari did not file a tax return in 2011 and neither did 34 of the 55 cabinet members including Interior Minister Rehman Malik.

Information was not available for one cabinet minister.

Of the 20 cabinet ministers who did pay, most made only negligible contributions, including Prime Minister Raja Pervez Ashraf, with 142,536 rupees ($1,466) and Foreign Minister Hina Rabbani Khar with 69,619 rupees ($716).

The cabinet member who paid the most was state minister for commerce, Abbas Khan Afridi, who paid 11.5m rupees last year ($118,677). Religious Affairs Minister Syed Khurshid Ahmed Shah paid the least with 43,333 rupees ($446).

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

It also found that 78 members of parliament are still not registered with a national taxation number.

Pakistan’s refusal to implement sweeping tax reform was instrumental in the collapse of a $11.3bn IMF bailout programme in November 2010.

The country is one of the biggest recipients of Western aid -- payouts that US Secretary of State Hillary Clinton and British Prime Minister David Cameron have said are difficult to increase when Pakistan’s own elite pays no tax.

But the report also suggested there had been some improvement since the Pakistan People’s Party (PPP) government was elected in 2008. In 2010, none of the then cabinet, including premier Yousuf Raza Gilani, paid tax, Cheema’s report said.

It says Gilani, who was dismissed by the supreme court in June for contempt, registered to pay tax in July 2010 -- more than two years after coming to power.

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.

The report comes after the chairman of the FBR, Ali Arshad Hakeem, offered Pakistani tax evaders the chance to pay around $420 to have the slate wiped clean in return for committing to pay tax regularly from next year.

Under a new law, yet to be approved by parliament, those unwilling to sign up for the amnesty and pay their taxes will face having assets seized, cell phone connections frozen and could be barred from leaving Pakistan.

“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 said.