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Half Pakistani lawmakers do not pay tax - report

Source: Reuters - Mon, 23 Dec 2013 12:26 PM
Author: Reuters
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Pictures of Pakistani currency bills lie with old coins and currency notes at a money changer booth along a road in Karachi October 25, 2012. REUTERS/Akhtar Soomro
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By Katharine Houreld

ISLAMABAD, Dec 23 (Reuters) - Nearly half Pakistan's lawmakers do not pay taxes, according to a study released on Monday, findings that may endanger the billions of dollars in IMF and other loans and aid shoring 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 U.S. ally of 180 million people.

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

The report, which identifies some ministers among the legislators 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. The Election Commission publishes financial declarations from political candidates and their statements from the tax authority.

Tariq Azeem, a spokesman 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 paid taxes, Azeem said: "I don't know."

Spokesmen for other political parties said they had not read the report and could not comment. None of the politicians identified in the report as having paid no taxes was available for comment.

Pakistan's public schools and hospitals are starved of revenue while frustration over poor public services frequently sparks riots and militant groups capitalise on anger to build support.

Pakistan has a nine percent tax to gross domestic product ratio, one of the world's lowest. Fewer than one percent of citizens file income taxes.

"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"

The Finance Ministry said December tax collection was up by about a quarter compared with last year. Cheema said nearly 80 percent 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 on the poor and lets the rich off again," Cheema said.

Nearly half all national and provincial legislators don't pay taxes, Cheema said in his report. More than one in 10 legislators had never 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.

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 spokesman.

"If we find anyone has knowingly misled income tax authorities, we will take serious action." Asked what action, Azeem said: "It depends." (Editing by Robert Birsel)

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