If anyone harbored any doubts about the endemic corruption of Pakistani politicians, their notions will be disabused by a new report indicating that nearly one-half (47 percent) of the country’s MPs do not pay any taxes. Even more amazing, 12 percent of Pakistan’s more than 1,000 national and provincial legislators have never even registered with tax authorities (meaning they don’t even have a national tax number). These figures came from a report compiled by the Centre for Investigative Reporting in Pakistan, an independent research organization, which pored over documents of financial declarations of political candidates and their tax statements.
For Pakistan, a nation burdened by myriad problems, including a failing economy, such revelations about lawmakers’ greed could potentially endanger the disbursement of billions of dollars in foreign aid and loans from the International Monetary Fund and other global agencies. The Guardian newspaper of Britain reported that a $6.7 billion financing package from the IMF is contingent upon Islamabad authorities cracking down on tax cheats in Pakistan. Britain, one of the country’s largest foreign donors, has also threatened to cut aid in the event that tax avoidance remains rampant among Pakistan’s wealthy elite.
Of those Pakistani lawmakers who bothered to pay any taxes, many forked over less than $100, with some coughing up as little as $17. For the record, Prime Minister Sharif (a multi-billionaire) declared that he paid $26,000 in income tax in 2012. However, the Federal Board of Revenue said he only paid $22,000 (one of many such discrepancies found among legislators’ tax records). In response to the damaging report, Tariq Azeem, a spokesman for the ruling party of Prime Minister Nawaz Sharif, explained that since the election commission and tax officials use different forms to compile tax data, that might explain some of the figures the report uncovered. But he had no explanation for why more than one-in-ten legislators have never registered with tax authorities.
Pakistani media reported that tax evaders come from all of the country’s mainstream political parties, although the ruling Pakistan Muslim League-Nawaz (PML-N) leads the pack of delinquent parliamentarians with 54 MPs who pay no taxes. Imran Khan's opposition Pakistan Tehrik-e-Insaf party has 19 MPs who are non-taxpayers. "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," added Azeem. "If we find anyone has knowingly misled income tax authorities, we will take serious action."
But many in Pakistan are skeptical that the government will take any steps against tax delinquents, since so many officials themselves skip the burden of paying taxes themselves. "If politicians don't pay taxes themselves, they have lost the moral authority to impose taxes on others," Umar Cheema, the author of the report and a journalist with Pakistan’s ‘The News’ paper, said. In response to a declaration by the finance ministry that tax collection revenues have increased by 25 percent over last year, Cheema countered that almost 80 percent of such money came from indirect taxes applied to such items as fuel. "Whenever there is pressure from the donor agencies, they just increase indirect taxes, which shifts the burden on to the poor and lets the rich off again," Cheema said.
Pakistani politicians are certainly not hurting for cash as many of them enjoy lucrative careers outside of government. According to the Pakistan Institute of Legislative Development and Transparency, the average Pakistani legislator had a net worth of £490,000 ($800,000) as of 2010. But the Guardian noted that tax evasion is hardly unusual in Pakistan -- the country boasts one of the lowest ratios of tax-to-gross GDP in the world (9 percent, versus an average of 14 percent for nations with similar per capita incomes). Less than 0.5 percent of the country’s eligible citizens even file an income tax return.
The Press Trust of India (PTI) cited a recent article written by Adam Thomson, Britain's outgoing High Commissioner to Pakistan, who warned that Pakistan needs to find and punish the wealthy elite who "can afford luxury cars and foreign trips but can’t afford to pay their taxes.” Thomson added: "The problem starts at the top. By paying their fair share of taxes and backing tax reform, businesses, wealthy individuals and elected politicians in Pakistan can lead by example.”
Earlier this year, Sir Malcolm Bruce, a member of Britain’s Liberal Democrat party, complained that the UK must reconsider foreign aid to a country where the wealthiest pay no taxes. "Unless [Pakistan is] prepared to work with us to deliver real improvements in health, education and poverty reduction, then we can't be expected to go on providing money from taxpayers in Britain earning less than wealthy non-taxpayers in Pakistan," he told BBC. "It is vital for Pakistan, and its relations with external aid donors, that the new government provides clear evidence that it will own and implement an effective anti-corruption strategy."