NationalVOLUME 17 ISSUE # 11

Pakistan’s legislators defy tax laws

Our lawmakers, who claim to make laws for us, don’t follow the rules themselves, including not paying their taxes. The income details of the members of parliament recently made public prove it.

Finance Minister Shaukat Tarin launched the tax directory 2019, with a delay of over two years, which also revealed that the trend of filing the income tax returns by the legislators went down in the first year of the Pakistan Tehreek-e-Insaf (PTI) government compared with the last year of the Pakistan Muslim League-Nawaz (PML-N) government. The tax directories for 2020 and 2021, however, have not yet been published.

The figures show a 28% decline in the taxes paid by the lawmakers and reveal that one in 10 legislators did not even file the tax returns in 2019. As against the past practice of only disclosing the taxes paid by the parliamentarians, this time the government decided to reveal their income under various heads to bring more transparency.

According to details, in 2019, 392 Members of the National Assembly and the Senate declared a cumulative income of Rs11 billion but they paid a mere Rs576 million in taxes. This means that the parliamentarians paid just 5.2% of their income – far lower than the standard maximum tax rate of 35% for a salaried person.

Out of a total of 446 Members of the National Assembly and the Senate, 392 filed the returns with the Federal Board of Revenue –down from 401 filed the returns in 2018. These 392 legislators paid a cumulative sum of Rs576 million in taxes against Rs800 million in the year before.
The fact that 54 members of parliament did not submit their income tax returns for the tax year 2019 shows their open defiance of law. Needless to say, the Federal Board of Revenue (FBR) must take action against the non-filing legislators. When the members of the four provincial assemblies were added to the list, the data showed that 1,003 lawmakers paid less than Rs1 billion in taxes on the cumulative income of Rs17.5 billion. The average tax rate came to a mere 5.5% for all of them.

Since the agriculture income tax was a provincial matter, the Federal Board of Revenue (FBR) had only disclosed their income from agriculture. The FBR chairman said that the 392 lawmakers had declared a cumulative sum of Rs625 million as their agriculture income in 2019.

The directory reveals some interesting details about the taxes paid by the country’s leading political figures. Prime Minister Imran Khan paid Rs9.9 million income tax, excluding the tax on agricultural income, which equalled to 22.7% of his declared income of Rs43.6 million. The premier was the 10th highest taxpayer among the 392 members of the parliament. Excluding the agriculture income, Imran’s effective tax rate came to 24%. Former President Asif Ali Zardari paid Rs2.2 million or 1.5% of his regular annual income of Rs146.6 million.

Finance Minister Shaukat Tarin was the fifth highest taxpayer, who paid Rs26.6 million in taxes on his Rs304 million income in 2019– at the rate of 8.7%. PML-N President and Opposition Leader in National Assembly Shehbaz Sharif paid Rs8.2 million tax which was 14.5% of his Rs56.4 million declared income, excluding agriculture income tax.

MNA Najeebullah Haroon paid the highest amount of Rs140.7 million tax or 7.5% of his Rs1.9 billion income. Senator Saifullah Abro came second with Rs60.7 million contributions to the national kitty on Rs213 million incomes. His effective tax rate was 28.5%, as the tax had been paid by the Association of Person in which he had stakes.

Senator Talha Mehmood of the Jamiat Ulema-e-Islam-Fazl (JUI-F) – the third highest taxpaying parliamentarian, paid Rs32.3 million on Rs180.3 million incomes at a rate of 18%. MNA Sheikh Fayyazuddin paid Rs28 million – just 1.7% of his total income of Rs1.7 billion. Still he was the fourth highest taxpayer in the category of the parliamentarians.

It is no secret that millions of Pakistanis live a lavish lifestyle but they do not pay any taxes. So far, they have remained out of the tax net. But now it is reported that the FBR has started sending notices to these people, asking them to pay their due taxes. In this connection special attention needs to be given to tax evasion by the country’s rich classes, especially the political elite which considers itself above the law. They are beneficiaries of a corrupt system and they must be held to account to set an example for the rest of the population.