Thursday, 13 December 2012

Condemnation without Verification

A report titled Representation without Taxation has been released by investigative journalist Umar Cheema on Dec 12, 2012 alleging that two-thirds of the MNA's are not paying any taxes. Umar Cheema is a respected journalist but perhaps not well versed with the procedures and laws of taxation. While the data presented is not completely inaccurate, the conclusions drawn certainly are.

The report has been prepared by obtaining a list of national identity card (CNIC) numbers of elected parliamentarians, most likely from the assembly secretariat. This list has been cross referenced with the Federal Board of Revenue (FBR) database to see if the member is registered as a tax payer. If the member is registered, his National Tax Number (NTN) was obtained and used to obtain the amount of tax paid with his income tax return for the year ending June 2011. The information is tabulated as per the snapshot below.

Based on this table, an assertion has been made that elected members are not paying any taxes where ever the box under the 'Tax' column is empty. This assertion is simply not true. Parliamentarians receive salaries from the government and like all salaried individuals, income tax is deducted and deposited to FBR at the time of payment of these salaries. Even if the member is not registered as a tax payer, the tax is still deducted and deposited with reference to the CNIC number of the individual. Labeling these members as "tax dodgers" based on this information is irresponsible. Only members who have paid tax on income other than their parliamentary remuneration have been recognized as tax payers by Mr. Cheema.

As regards to declaration of other income, one must also recognize that a large number of these parliamentarians derive their incomes from the agricultural sector which is legally exempted from federal taxes. It is also probable that some of these members carry out their businesses in the name of corporate entities. These corporate entities are registered taxpayers themselves and file their own statements of income tax with the FBR. The income and the taxes paid by the corporation is not reflected on the income statements of its directors. It is also possible that the elected representative carries out his business in the name of his wife or children. In which case the income and taxes paid will be included in the income statement of the legal owner.

Members of the parliament who have not filed an income tax return are guilty but not of what they are being accused of. They are guilty of non-filing of income tax returns. However considering non-filing as conclusive proof of tax evasion is naive and irresponsible. As soon as the report was released, people started hurling abuse at the elected representatives based on the assertions in the report. Even a senior journalist like Dr. Shahid Masood was misled into making a sweeping condemnation of all "TAX CHORS" and calling for their arrest.

Another journalist tweeted "Mushahid Hussain paid only Rs82 as tax, even I pay more than that every month!" Had he known that Mushahid Hussain has income tax deducted at source, exactly like he does, he may not have made this remark.

Had this report been released by some other journalist, it would have been labelled as an attempt to discredit the politicians at the behest of "undemocratic forces". But given Mr. Cheema's history such an accusation does not carry weight. Personal income tax returns are not public documents. Anchors have waved personal income tax returns of parliamentarians in front of the cameras since the release of this report without any regard to the legality of such an act. Mr. Cheema has proudly tweeted
Perhaps Mr. Cheema is unaware that the reason for this it that it would be illegal to do so anywhere else in the world and would entail severe legal consequences.

The purpose of the above analysis is not to absolve the parliamentarians from suspicions of tax evasion. The culture of tax evasion is prevalent in Pakistan and no section of society is free from it. FBR has the means to correlate personal expenses of individuals such as credit card bills, electricity, gas, mobile phone use, club memberships, land ownership, vehicle ownership with the declared sources of income to identify suspected tax evasion. Such an analysis is required to identify tax evaders and cannot be replaced by the simplistic approach of Mr. Cheema.


  1. Saud, bashing politicians is our national pass time, people like you are trying to take that away from us, you are so cruel! (in case it's not clear, I am being sarcastic)

  2. One point was that they had not filed their tax returns which is still required under the law. Besides their salaries would still not explain their life styles.

  3. Filing tax return by an individual is not considered as mandatory im Pakistan as compared to other countries specialy like Canada, where every single person whether he has income or not bound to file personal incometax by law. If Pakistani law does not bound people to file personal income tax returns than all this report is B.S