Welcome to Pakistan; a paradise for tax dodgers

14 Jun

taxThe cat is finally out of the bag and it has exposed the real face of ruling elite. The budget 2013-14 clearly shows that the rules are totally insensitive to tens of millions of those who voted them into power. They have a visible tilt for those who are rich and tax dodgers at the same time. Like in the past, the poor and the salaried class, who are already paying through their nose to keep the country going, will continue to be milked. The direct taxes have been levied on the salaried class and indirect taxes, as usual, have to be paid by the common man. The rich and beautiful of this country will continue to be having a good time at the cost of poor who will be pushed towards the wrong side of the poverty line.

Normally, the civilized societies keep a fine balance between the direct and indirect taxes. Direct Taxes are the taxes that are levied on the income of individuals or organizations. Income tax, corporate tax, inheritance tax are some instances of direct taxation. Income tax is the tax levied on individual income from various sources like salaries, investments, interest etc. Corporate tax is the tax paid by companies or firms on the incomes they earn. These taxes are paid by the rich.

The common man pays indirect taxes through various means. Indirect taxes are those paid by consumers when they buy goods and services. These include excise and customs duties. Customs duty is the charge levied when goods are imported into the country, and is paid by the importer or exporter. Excise duty is a levy paid by the manufacturer on items manufactured within the country. Usually, these charges are passed on to the consumer. Same is the case with Value-added Tax (VAT) and General Sales Tax (GST) but the experts classify it under direct taxes. For poor strata of the society, the indirect taxes constitute a large chunk of their income while it is less than fraction of the income and resources of the rich.

Generally, the direct taxes should exceed the indirect taxes in a poor country. But in the case of Pakistan, it has always been the other way round. In the budget just presented, direct taxes constitute just 38% of total tax revenue. The rich have been spared of their obligation to pay up. Without making contribution to the exchequer the money amassed by the rich will continue to be ill-gotten if not plundered from the hapless poor.

Just look at the disparities of obligations and injustice of taxation measures. Daily Pakistan Today has presented some startling figures collected by NADRA last year which show only the tip of the iceberg. According to these figures:

  • There are 1.611 million people who frequently embark on international tours but do not pay a single penny as income tax.
  • About 584,730 Pakistanis have multiple accounts in domestic and multinational banks, but do not possess NTNs.
  • Over 56,000 people live in posh areas and more than 20,000 people own luxury cars, still pay no income tax.
  • There are 66,736 individual consumers who pay large utility bills, but no income tax.
  •  More than 13,000 people have licenses of both prohibited and non-prohibited weapons, but they do not possess an NTN.
  • There are 25,130 people who are engaged in lucrative professions like medicine, engineering, law and chartered accountancy, but they do not pay a single penny as income tax.
  • Nearly three million people possess a National Tax Number (NTN), but only 1.4 million of them filed income tax returns last year.

These figures, though do not present the comprehensive situation, clearly show that Pakistan is a paradise for tax-dodgers. While a clerk is made to cough up taxes from an income which does not give him a decent living, those who live a life of princes are all exempt. And those who call themselves business community are totally immune to cough up because they do not document their transactions. Currently, 70% of the economy is informal and remains out of tax net. Same is the case of filthy rich whose life style suggest they should contribute but they do not make any contribution.

The best course to mobilize the resources would be make NTN card a door-opener. It should be made compulsory to give NTN number for all occasions from the admission of children to buying cars and houses and for purchasing air-tickets. This will provide a treasure trove of potential taxpayers who are out of the tax net.

 

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3 Responses to “Welcome to Pakistan; a paradise for tax dodgers”

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