Whether or not public representatives evade taxes, or cheat on them, would become apparent only from an examination of their tax returns. According to a report by the Centre for Peace and Development Initiatives, released on Wednesday jointly with the Centre for Investigative Journalism, almost 70 percent of MNAs and Senators do not do so. Of 104 Senators, only 49 paid income tax, while only 90 of 341 MNAs filed returns. The report did not include provincial legislators, but if the national figures are any indication, few MPAs will be found who file returns. According to the study, President Asif Zardari was one of those not filing a tax return, something done by only 31 of 55 cabinet members. The report said that only two percent of the county’s population of 180 million are registered to pay tax, and only a quarter of those actually do so. It is also worth noting that the failure to file is not limited to, or even focused on, any one party, but is spread across the board. This failure to file should assume importance with the MNAs going up for re-election in a brief while, but is perhaps more important because these are the members who have voted on taxation measures in the recent past, and thus seem to be examples of taxation without representation, in the sense that those filing returns and paying taxes are not represented. Legislators should remember that not filing a return provides anyone wanted to control them an easy lever to use.
One excuse that will be readily claimed is that the legislators and ministers receive salaries from which income tax is already deducted. Deduction at source does not mean that returns are not to be filed, Similarly, there is a massive exemption, in the form of the one on agricultural income. Legislators need to claim that exemption in a return. Not filing a return should not be an option for anyone, let alone politicians. Legislators are taking advantage of two things in not filing returns. First, the culture of tax evasion that stops their constituents finding out whether they file returns or not, because they are too busy evading themselves. Second, the VIP culture that prevents tax officials from discharging their duty to ensure filing, especially by legislators.
The failure of parliamentarians to file returns is linked to the low tax-to-GDP ratio, but so long as Pakistan depends on foreign aid money, it can expect donor interest in how money is spent and raised by the government, as well as in the role played by various actors in this, such as those who actually vote the taxes and approve the budgets. The examination of the taxation machinery should include a much-needed reform of the tax collection bureaucracy, but that is being skirted around. And why not? Those elected to oversee that bureaucracy seem to have used their position to avoid its exactions. It is for the parties, while awarding tickets, to make sure they only do so to those who regularly file returns. Only then will it be possible to reform the tax bureaucracy.