ISLAMABAD, Pakistan — Fewer than a third of Parliament members in Pakistan file annual tax returns, according to a report published on Wednesday, lending new focus to longstanding complaints from foreign donors and ordinary Pakistanis about tax evasion at the highest levels of society.
The report, which was published jointly by two civil society organizations — the Center for Peace and Development Initiatives and the Center for Investigative Reporting in Pakistan — found that just 126 of the country’s 446 federal lawmakers filed income tax returns in 2011. Among the leaders who did not was President Asif Ali Zardari, the report said.
The report does not take into account the tax paid by politicians on their parliamentary salaries, which is automatically deducted by the government. Instead, it focuses on the lawmakers’ declarations of supplemental income from property, professional practices and other sources of revenue.
Nevertheless, in a country where many politicians enjoy lifestyles that far exceed their official salaries, the report raises new questions about the dedication of top lawmakers in Pakistan to enforcing the tax laws they are supposed to oversee.
“Tax evasion has become a social norm in our country,” said Umar Cheema, an investigative journalist who compiled the report. “People don’t consider it a crime. But this tax demand established a bond between the people and the state. That’s how you become a stakeholder in society.”
Pakistan has a chronically low rate of income tax collection. Of the country’s 180 million people, only 2 percent are registered to pay tax, and fewer than a quarter of those actually do so, according to the report.
Income tax evasion is particularly high among the wealthiest Pakistanis, leaving the country with the lowest ratio of tax to gross domestic product in South Asia.
Meanwhile, the poor bear a disproportionately high tax burden, experts say, because of indirect taxes on electricity, food and other goods.
The country’s flawed tax system has long been an issue for Western donors, who have given the Pakistani government billions of dollars in humanitarian and development aid over the past decade and supported bailout programs from multinational institutions like the International Monetary Fund.
Addressing a Congressional hearing in 2010, Secretary of State Hillary Rodham Clinton said: “They don’t tax income. They don’t tax land. And a lot of the wealth is held in these huge feudal estates.”
“They have no public education system to speak of, and it’s because the very well off, of whom there is a considerable number, do not pay their fair share,” she said.
The report found that tax evasion was spread evenly across the political spectrum, with low rates among the governing Pakistan Peoples Party, the opposition Pakistan Muslim League and other religious and regional parties.
In the Senate, it found that the lawmaker who paid the most in taxes last year — $133,000 — was Aitzaz Ahsan, a lawyer who helped oust President Pervez Musharraf from office in 2008. The least of those who filed was paid by Mushahid Hussain, a former Musharraf adviser, who paid 84 cents.
Mr. Cheema said his findings were based on a combination of publicly available data and questionnaires he sent to members of both houses of Parliament — though just two members responded to his queries.
But some politicians and tax experts questioned Mr. Cheema’s findings, saying they did not take into account the wider failings of the country’s tax laws.
Ikram ul Haq, a lawyer and tax expert, said it was incorrect to describe two-thirds of Parliament members as “tax dodgers,” because they automatically pay tax on their salaries. But, he added, there is a serious problem with the declaration of income from land and other assets. Some politicians do not declare their extra income, or grossly underestimate it, he said.
And others legally avoid taxation because their income is largely derived from agriculture, a sector that is exempt from federal taxation — a longstanding complaint of the country’s urban middle classes.
Ayaz Amir, a lawmaker and landowner from Punjab Province, who said he had filed his tax returns, said the main problem lay with the broken system of tax enforcement. “The point is not that 70 percent don’t file their returns,” he said. “It’s that those who do file fictitious returns and do not declare the true extent of their income.” The problem is not limited to lawmakers, he added. “It’s the entire prosperous class of Pakistan. Their lifestyles are totally out of sync with their declared income.”
Another difficulty is that, even when breaches of the tax laws are discovered, the rich and politically connected are rarely prosecuted. “Law enforcement is in general very weak,” said Ahmed Bilal Mehboob, executive director of the Pakistan Institute of Legislative Development and Transparency. “And if you happen to be an influential and powerful person like a politician,” he said, “then it is even weaker.”
Most Pakistani Lawmakers Don’t File Tax Returns, Study Finds
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Most Pakistani Lawmakers Don’t File Tax Returns, Study Finds
