Gaping loophole: Over half of cabinet members, MPs do not pay income tax

Speakers call for making tax evasion criminal offence

ISLAMABAD: Participants of a roundtable here on Wednesday mentioned that 65 per cent of the members of the parliament and more than half of the federal cabinet did not pay their income tax.

The discussion “Tackling the tax crisis in Pakistan” was hosted by the Chevening Alumni Association in collaboration with the British High Commission.

National Accountability Bureau (NAB) Deputy Chairperson Rear Admiral (retired) Saeed Sargana said that if a businessman was fit enough to count his money, he was fit enough to fill a form and pay his taxes.

“It is easy for people to send money abroad through “hundi” and get it back in the form of remittances as white money,” he observed.

Sargana said that tax evasion was still not a criminal act in the country. “Tax evasion should be made a criminal act,” he suggested.

Jude Maxwell, a British High Commission official, told the audience that there were 1,300 Chevening alumni in Pakistan. This year, she said, the British government had tripled the number of scholarships for Pakistani citizens. This year 70 scholarships are available, Maxwell said.

She said hoped that public debate would encourage more Pakistanis to pay their taxes.

Maxwell was optimistic that innovative solutions would be found for tax reforms in the country.

Federal Board of Revenue (FBR) Chairperson Tariq Bajwa said the tax-to-GDP ratio had increased from 8.4 to 9.5 per cent. The low tax-to-GDP ratio is still the main reason behind the tax crisis. He said that even for the current expenditure the country had to borrow money.

Bajwa said that tax revenue from sectors the government subsidised was mismatched.

He said that the agriculture sector accounted for 22 per cent of the GDP, but in terms of taxes it contributed only a fraction of a per cent.

The FBR chairperson said that a similar situation existed when it came to the retail and transportation sectors.

He said that the tax footprint was both narrow and shallow.

“Only 900,000 pay their taxes in the country,” Bajwa said, adding the average taxpayer paid only Rs18,000.

Bajwa said that concessions had even been given to individuals. He said that the largesse had cost up to two per cent of the GDP. “Remittances could neither be questioned nor taxed,” he remarked.

Bajwa said that there existed a huge gap between DC rates and market value of land.

He said that in Islamabad, the official rate was Rs9.6 million that explained money laundering.

The tax body chief said that the Benami laws allowed for unchecked bank transactions.

“A large number of transactions take place outside formal economy, but they use banks. So we taxed bank transactions,” Bajwa said. “The [traders] reaction shows that we hit the nail on the head.” He said that no concessionary statutory regulatory order (SRO) or case-by-case exemption was given in past two years.

Meanwhile, Barrister Zafarullah Khan said that the majority of direct taxpayers were the salaried class.

He said that the legislation was very confusing. “Even I, as a lawyer, have great difficulty understanding tax laws,” the barrister said.

Published in The Express Tribune, July 30^th, 2015.