Tax filers

Recently released details from the tax directory for the 2017-18 fiscal year show just how broken the tax system is. In that year, 1.13 million salaried individuals paid Rs129 billion in income tax or Rs114,000 per person. It should be noted that most salaried people cannot avoid paying income tax simply because the money is deducted before being paid. Meanwhile, 1.41 million self-employed individuals — mostly business owners — paid Rs185 billion in income tax, or Rs131,000 per person. It must be noted that businessmen have many ways to understate their incomes to reduce their tax bills, and it is clear from the average taxes paid that many of them are getting away with murder. This is because it is almost unheard of anywhere in the world for the entrepreneur class to be making less money than the salaried class.

Even the location data shows worrying trends. Punjab, the most populous province, had the most return filers, but relatively low average payments of Rs280,000. Sindh, home to the country’s commercial capital Karachi, had one of the higher average tax payment figures, at about Rs551,700 each, or four times the national average. The federal capital, meanwhile, had 115,000 filers paying about Rs1 million each, or eight times the national average. Yet the entire province of Khyber-Pakhtunkhwa only had 133,745 returns filed, paying Rs216,830 each. Balochistan averaged Rs371,000 each from 35,000 returns filed. The terrible numbers for K-P and Punjab are indicative of where we stand.

Meanwhile, of the 43,191 tax-paying companies, 91% paid less than Rs5 million each, and 80% paid less than Rs500,000. This is another reflection of how easy it is to break the rules while, at least on paper, pretending to follow them. Even today, several large and mid-size companies in the country continue to pay their employees in cash to avoid taxes. Some of the worst offenders are in every level of retail, be it grocery stores and supermarkets, or high-end home goods and fashion labels. We hoped that the government had some plan to bring them into the net, but then we remember that it is still struggling to get this year’s returns ready.

Published in The Express Tribune, September 8^th, 2020.

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