“Taxes allow the government to collect money from people who have it, which means taxes are looked upon as a way to transfer money to the federal government. If the government wants to spend more than it collects by taxing, it can raise additional funds by borrowing from savers”— in The elites of Pakistan— the members of the , businessmen-turned-politicians and absentee land owners— are responsible for the present economic mess, that has pushed the country into a deadly —they beg for bail-outs from International Monetary Fund ( ) and ironically talk about ! They make tall claims about reforming the tax system, but shamelessly use the Federal Board of Revenue ( ) as their handmaiden in getting of billions of rupees. Through concessionary Statutory Regulatory Orders (SROs), non-collection of agricultural income tax, meagre or non-taxation of luxury and commercial properties e.
g. clubs and golf courses, unprecedented given to generals, judges and high-ranking civil officials, the national kitty suffers colossal —if these are recouped our tax-to-GDP ratio should be between 12% to14%. The narrative that Pakistanis do not pay taxes—popular with analysts, TV anchors, academicians, policymakers and foreign donors—is nothing but a .
The ground reality is that the poorer Pakistanis are the most , whereas the powerful elites not only enjoy tax breaks but also tend to thrive on labour and taxes of the down-trodden - a scenario that parallels 1780s France. The concentration of power and wealth in the elite's hands, coupled with a lust for control, has given rise to perpetual institutional confrontations, civil commotion and economic collapse—putting to risk the very survival of the State. Our elites, suffering from multiple maladies like self-righteousness, self-praise, fear of losing power and money and despair arising out of affluence, are the root causes of many of our problems—they neither have the will nor moral courage to fight even extremists.
After failing to protect the life and property of the people, they are imposing more and more —making life for the poor and enriching merchants and . While the government in power perseveres to appease the mighty generals, forever-sullen judges and greedy bureaucrats, there is nothing left for the general public—their living conditions keep deteriorating with each passing day! There is a dire need to expose the role of these elites in our socio-politico-economic decay, but the media, also beneficiaries of the system, cunningly divert the attention of the masses towards trivial issues. All these classes are captives of self-interest and victims of .
The concentration of power and wealth in their hands, coupled with lust for control, has given rise to perpetual institutional confrontations, civil commotion and economic collapse—putting to risk the very survival of the State. It is an undeniable fact that at least of mobile users—prepaid or post paid—are paying exorbitant tax of over 40%. Majority of them have income below the taxable limit.
There is no way they can get refund of the adjustable 15% income tax withheld at source, as cost of filing of return would be a great deal more, the procedure being cumbersome (every refund application to be filed online) and even if all the requirements stand fulfilled, the tax officials would ask for their “due share” in the end. Prime Minister and Deputy Prime Minister , Finance Minister sitting at the top are either not aware of these mundane realities or they are least bothered about the plight of the common citizens. The corrupt and inefficient government servants faithfully serve the political elite, and in the process, also make a “fortune”—all at the expense of the general public.
The most unforgivable crime of the our elites is unending process of of State property and on unprecedented perquisites and perks enjoyed by them—they get State lands as rewards and awards (free or at throwaway prices) and a host of free benefits but do not pay due on them even where the law so requires. Adding insult to injury, the taxes collected from the masses are shamelessly wasted on their luxuries—palatial bungalows, fleets of cars, army of servants, foreign tours and what not. The only solution lies in monetizing all their benefits and perquisites as suggested way back in 2013 by Planning Commission under , now Vice Chancellor of Pakistan Institute of Development Economics ( ).
Proposals like ‘ , prepared by suggesting savings of billions and fair deal for government servants, were strongly resisted by the vested-interest till today, confirming the of our in squeezing and looting the national resources. The corrupt and government servants faithfully serve the political elite, and in the process, also make a “fortune”—all at the expense of the general public. Take the example of FBR where billions are annually due to incompetence and corruption—this is despite the various foreign-funded reform programs since 2001.
The fact of wastage of billions and plundering of national resources is even by the incumbent Prime Minister repeatedly. Since the rich and mighty do not pay income tax, regressive taxes are imposed and even then FBR miserably fails to meet the fixed revenue targets. For the just ended fiscal year 2023-24, shortfall recorded was turned into “excess”! It was elaborated in the last week’s .
In fiscal year 2023-2024, against the assigned target of , FBR has claimed collection of . According to a Press , FBR has collected Rs. 4.
53 trillion as income tax, over Rs. 3.1 trillion as sales tax, Rs 576 billion as federal excise duty and Rs.
1,104 billion as custom duties. Low tax collection in Pakistan is because of the reason that various vested-interests enjoy exemptions and concessions to the tune of in fiscal year 2022-23, Rs. 4.
5 trillion in fiscal year 2023-24, and almost the same amount is lost due to inefficiency and corruption. At provincial level, there is no will to collect agricultural income tax from the rich absentee landlords—share of this tax is even less than 1% of GDP! Tragically, the poor whose income falls below taxable limits under the income tax law are —funds extorted from their hard earned money are plundered and wasted by the ruling elite. The militro-judicial-civil complex, ministers, state ministers, advisers, MNAs and MPAs together squandered in fiscal year 2023-24 on perks and perquisites alone.
Not only this, the powerful militro-judicial-civil complex—the real rulers of Pakistan—did not pay a single penny as tax on plots and benefits in utter violation of section 13(11) of the Income Tax Ordinance 2001, which says: “Where, in a tax year, property is transferred or services are provided by an employer to an employee, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the property or services determined at the time the property is transferred or the services are provided, as reduced by any payment made by the employee for the property or services.” Section 14(b) of the defines “services” to include the provision of any facility” and the concept of “fair market” is defined in section 68 as under: “68. Fair market value.
– (1) For the purposes of this Ordinance, the fair market value of any property or rent, asset, service, benefit or perquisite at a particular time shall be the price which the property or rent, asset, service, benefit or perquisite would ordinarily fetch on sale or supply in the open market at that time. (2) The fair market value of any property or rent, asset, service, benefit or perquisite shall be determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash. (3) Where the price referred to in sub-section (1) is not ordinarily ascertainable, such price may be determined by the Commissioner.
” Section 39(1)(j) of the is also attracted which declares the following as income chargeable to tax: “The fair market value of any benefit, whether convertible to money or not, received in connection with the provision, use or exploitation of property.” It is sad to note that militro-judicial-civil complex blatantly violates tax provisions and does not pay any tax on getting State land, free accommodations and other benefits—all covered in in section 13(11) and 39(1)(j) of the . FBR is not at all interested to tax them—their top notches are also beneficiaries of these benefits.
Ruling elites are unwilling to pay taxes on their unprecedented and exorbitant perquisites and benefits, shifting burden of taxes on the weaker sections of society. This is the real dilemma of Pakistan. The present Chairman has made no effort to tax about four million tax evaders despite receipt of data from National Database and Registration Authority (NADRA).
Action should be taken against them and all other tax cheats, but first of all recovery should be made from delinquent elected members, mighty civil and military officers and other beneficiaries for receiving State lands and tax free benefits. During the government of Pakistan Peoples Party after the elections of 2002, a former Member of FBR a letter to then Finance Minister, Abdul Hafeez Shaikh, that massive tax evasion and loss of revenue had occurred due to non-taxation of government property given to the high-ranking officials at concessional rates—the minister took no action and same is the case with all the finance ministers of all democratic regimes since then. It can be a test case for Muhammad Aurangzeb, banker-turned Federal Finance Minister though he has till now shown a determination to impose tax on all—though excessively on salaried class and the less privileged section of society.
It is time for the government to bring someone from the Inland Revenue Service, who has command over taxation laws with rich experience of administration. The present chairman unfortunately lacks both. The new Chairman will certainly face an uphill task in taxing the ruling elite.
The present Chairman has made no effort to tax about four million tax evaders despite receipt of data from National Database and Registration Authority ( ). Action should be taken against them and all other tax cheats, but first of all recovery should be made from delinquent elected members, mighty civil and military officers and other beneficiaries for and . of lost revenue of billions of rupees from them will certainly convey a loud message to all that FBR means business and nobody is above law.
As the mighty sections of society are not paying taxes due from them, the common people rightly argue against discharging their tax obligations, especially when the State has to protect their lives and properties, what to talk of providing basic facilities of education, health, housing and transportation etc. The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE) The Friday Times is Pakistan’s first independent weekly, founded in 1989.TFT offers a diverse range of perspectives on national and international issues.
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