Friday, April 5, 2013
Pakistan's elites are identified as the people who pay no or little taxes and still enjoy the luxuries of life without any fear of tax authorities who are themselves up to their neck in the quagmire of corruption. The number of groups and individuals who should pay taxes is around eight per cent of the population but only two per cent meet their national obligations, according to the Federal Board of Revenue. British Prime Minister David Cameron and former US Secretary of State Hillary Clinton already mentioned about difficulties in increasing assistance to Pakistan when its own elite pays no taxes. This exactly was the perception of the British parliament's International Development Committee which reluctant in coming to the assistance of Pakistan, particularly in education and health sectors, by doubling the UK's assistance to £446 million ($675 million) in 2014-2015, making it the biggest recipient of British aid. But UK lawmakers said it would be unfair for Britain to fund the social sector projects in Pakistan unless its new government, due to be elected in May, tackles rife corruption and tax evasion. These observations are so pungent as to make all Pakistanis hang their heads in shame, more particularly the privileged ruling classes. Britain, the committee said, wanted to help Pakistan in its social sector, but "we cannot expect the people in the UK to pay from their taxes to improve education and health in Pakistan if the Pakistani elite is not paying income tax," . Pakistan's rich do not pay taxes and exhibit little interest in improving their socio-economic conditions and creating opportunities for the country's poor. Citing figures from the Pakistan Board of Revenue, the committee said only 0.57 per cent of Pakistanis paid income tax last year and that no one has been prosecuted for income tax fraud for at least the last 25 years. Less than 30 per cent of Pakistan's members of parliament pay tax, it said adding that there was a "powerful case" for continuing aid to Pakistan, a country with "real poverty and serious security problems" as well as strong links to its former colonial power. But even the past donations have often failed to reach poor Pakistanis because of corruption. The FBR's own data says that some 2.7 million people from the privileged class having big houses, two cars, two bank accounts and excessive foreign tours pay little or no taxe. The 70 per cent Pakistani lawmakers, who have long been paying no taxes, own an estimated average net wealth of $882,000, according to a news report released in December last. Owners of huge tracks of agricultural land, industrialists and businessmen all conduct themselves in such a shameful manner. This is mainly because of their political clout as several such influential people are in politics and tax collecting agencies fear laying hand on them for political expediency. The problem starts at the top. Those who make revenue policies, run the government and collect taxes, have not been able to themselves set good examples for others and this behavior mounts pressure on authorities not to reform the tax structure and this ultimately stresses the national economy that is as fragile as decades ago. Pakistan has one of the lowest tax-to-GDP ratios in the world, estimated at 9.2 per cent. This is mostly because of the tax evasion culture. This may be exemplified with the fact that only 260,000 out of 190 million citizens have paid tax consecutively for the last three years. Pakistan's refusal to implement sweeping tax reform was instrumental in the collapse of a $11.3 billion IMF bailout programme in November 2010. Not the IMF alone, the failure of reforming the economy, has earned a bad name for Pakistan with other donor agencies as well. What may be the gravity of tax evasion culture may be imagined from even the official perception of the affairs that even the energy crisis in the country is less disturbing issue than tax evasion. The national exchequer faces a loss of Rs1,900 billion due to tax evasion. The state of Pakistan has a rare opportunity to add billions to the exchequer if candidates to the coming parliamentary elections are honestly quizzed about the amount he or she has paid in taxes. It is not difficult to assess any candidate's wealth because this information is mandatory to add in nomination forms. If candidates can be asked absurd and ambiguous questions about their person, they must also be asked about his or her tax obligations.