60 per cent candidates either tax defaulters or out of tax net

ISLAMABAD: Around 60 percent candidates who have submitted nomination papers for the national and the provincial assemblies are either out of tax net or have not filed tax returns, according to a source in the Federal Board of Revenue who dealt with the record of contesting candidates.

As many as 21,428 submitted nomination papers for the 2018 elections; 30% of them didn’t have the National Tax Number meaning thereby they are out of the tax net. Another 30% though have NTNs, they didn’t file tax returns.

Legally speaking, non-filers are tax defaulters. During the 2013 elections, the Lahore High Court had ordered the FBR to upload the list of candidates who are tax defaulters but it was not done.

The situation in the previous election was not much different as far as the tax compliance is concerned. A study by Basit Ali Khan, a data journalist, has found that 50% candidates were without NTNs when filed 2013 election nomination papers. And of the remaining 50% who had the NTNs, only 11% filed tax returns.

Basit examined the data of candidates that the FBR had shared with the ECP on the latter’s request. As many as 28,302 candidates had filed papers in the last elections, which are 24% more than this election. Basit analyzed the FBR responses of 20,113 candidates whose record was uploaded on the ECP website. The remaining candidates had withdrawn from the contest. In addition, there were as many as 1,164 candidates who had filed papers from more than one constituencies.

The total income of 2013 election candidates that they had declared with the FBR in 2012, the last tax year before the 2013 elections, was Rs12.71 billion and the tax paid against it Rs1.21 billion (9.59%). Again, this was the contribution of those 50% who had filed their tax returns; many of them are billionaires. Only a tax audit would determine their real worth and how true were their declarations.

An attempt by Asad Umar, former PTI MNA, to push for tax audit of the lawmakers was thwarted by previous National Assembly. A 10-member special committee was formed in 2014; half of its members had paid tax less than Rs100,000. After 9-month ‘deliberations’, the committee reached the conclusion that there was no provision in the existing law for separate tax audit of lawmakers as if an amendment in the law was to be done by a forum other than the parliament.

However, in a rare display of unity, all the political parties in the parliament joined hands in 2017 to remove clauses in the nomination papers requiring them to share tax details through when the Election Act 2017 was passed in October last year.

As the Election Commission of Pakistan was authorized to design the nomination papers, it required tax details of three years preceding the election, in addition to 18 other declarations regarding loan default, citizenship, pending cases/inquiry if there is any and business details, etc, to be mentioned in nomination papers.

The parliament quietly usurped the ECP's powers of designing the nomination papers through the Election Act 2017, deleting all above-stated declarations a candidate had to make. When the ECP objected, its officials were told that parliament was supreme and hence authorised to amend the law and the Constitution. In this case, the lawmaking was done in the personal interest of the lawmakers as it was avoided when their tax audit was demanded.

However, a dramatic reversal occurred through the intervention of the Supreme Court that directed the ECP to ask for a separate oath wherein a candidate is to declare everything deleted in the nomination papers thus ensure transparency which was attempted to be curbed.

Basit’s research found that 17% candidates for the National Assembly had filed tax returns in 2012, a year before filing nomination papers for the 2013 elections, 15% of Punjab Assembly, 11% of Sindh Assembly, six percent each of KP Assembly and Balochistan Assembly. Almost, the same percentage was noted in the case of NTN holders. In addition, he spotted as many as 572 candidates whose declared income in tax return was more than one million rupees, however, the income tax amount was zero.

The lawmakers who levy taxes on public through financial bill are averse to this practice by themselves. An investigation by this correspondent in 2011 found that 70% members of the-then National Assembly and Senate were not filers of tax returns and one in five lawmakers was without the NTN. A follow-up report determined that 50% lawmakers were non-filers and one in five was without NTN.

Taking action on that report, the former finance minister Ishaq Dar, had ordered all non-NTN holding lawmakers to register themselves for the tax and ordered the FBR to conduct force registration if they don't volunteer. He also announced publishing two tax directories each year: one of lawmakers and one of other taxpaying citizens. Directories were published for the tax years from 2014 to 2016 and the process stopped after he left.

While this publication made Pakistan the fourth country in the world where tax data was public after Norway, Sweden and Finland, this transparency in absence of accountability noted little improvement in tax culture of Pakistan which has one of the lower tax-to-GDP ratios.

Originally published in The News