MPs pay less tax than employees
The government released details of MPs’ incomes on Monday which showed a 28% drop in taxes paid by lawmakers and revealed that one in ten lawmakers had not even filed tax returns in 2019.
In 2019, 392 members of the National Assembly and the Senate reported a cumulative income of 11 billion rupees, but they only paid 576 million rupees in taxes. This means that parliamentarians only paid 5.2% of their income, which is well below the standard maximum tax rate of 35% for a salaried person.
Prime Minister Imran Khan paid 9.9 million rupees in income tax, excluding agricultural income tax, which was equivalent to 22.7% of his reported income of 43.6 million rupees. The prime minister was the 10th highest taxpayer among the 392 members of parliament, Imran only paid 282,449 rupees in tax in 2018.
The Prime Minister declared 38.9 million rupees as normal income, 2.3 million rupees under the fixed tax regime and 2.4 million rupees as farm income. Excluding agricultural income, Imran’s effective tax rate is 24%.
As the government disclosed the income and taxes paid by parliamentarians, it introduced legislation last week to exempt the armed forces from a similar disclosure.
Finance Minister Shaukat Tarin launched the 2019 Tax Directory with a delay of more than two years, which also found that the tendency to file tax returns by lawmakers declined in the Pakistani government’s first year. Tehreek-e-Insaf (PTI). compared to last year the government of the Muslim League of Pakistan-Nawaz (PML-N).
The tax directories for 2020 and 2021 are still pending.
Out of a total of 446 members of the National Assembly and the Senate, 392 filed the declarations with the Federal Board of Revenue – against 401 in 2018. These 392 legislators paid a cumulative sum of Rs576 million in taxes against Rs800 million. the previous year – showing a decrease of 28%.
The fact that 54 MPs did not submit their tax returns for the 2019 tax year does not reflect well the performance of the RBF. The RBF did not make any statement as to whether any action had been taken against these parliamentarians.
Contrary to the previous practice of only disclosing taxes paid by parliamentarians, this time the government decided to disclose their income under different headings to bring more transparency, said RBF chairman Dr Mohammad Ashfaq, during the launch ceremony.
Tarin said the government had information on 15 million Pakistanis, who had lavish lifestyles but did not pay taxes. The RBF would start sending notices to these people starting this month, asking them to pay their taxes owed, adding that if they had any objections there would be a third-party audit.
Last week, the government introduced a legal amendment to allow the RBF to disclose information about the assets of public office holders and officials, but exempted the armed forces from disclosure. Asked on Monday, Tarin did not answer the question as to why the armed forces were exempt.
Read: 188 lawmakers did not pay income tax for fiscal year 2019: FBR
A breakdown of the data showed that 80 senators paid 169 million rupees in taxes on a cumulative income of 1.5 billion rupees, bringing the average tax rate for members of the upper house of parliament to 11%.
Likewise, the 312 Members of the National Assembly paid 408 million rupees in taxes on their cumulative annual income of 9.5 billion rupees in 2019, paying only 4.3% of their income in taxes.
Since farm income tax was a provincial matter, Dr Mohammad Ashfaq said the RBF only disclosed their farm income. The RBF chairman said the 392 lawmakers declared a cumulative sum of Rs 625 million as farm income in 2019.
At the provincial level, 44 members of the Assembly of Balochistan paid 58.3 million rupees in taxes out of 944 million rupees, at an average rate of 6.2%. The 91 members of the Khyber Pakhtunkhwa Assembly paid 30 million rupees in taxes on income of 720 million rupees, or only 4.2% of their reported income.
The 327 members of the Punjab assembly declared revenues of 3 billion rupees and paid 231 million rupees in tax, bringing their average tax rate to 7.7%. The 149 members of the Sindh Assembly paid Rs 82.5 million in taxes on Rs 1.8 billion in income, bringing the average tax rate to 4.6%.
When members of the four provincial assemblies are added to the list, data showed that 1,003 lawmakers paid less than Rs 1 billion in taxes on a cumulative income of Rs 17.5 billion. The average tax rate was only 5.5% for all of them.
This shows that there is a huge income tax gap that RBF leaves unplugged. The president of the FBR had said a few weeks ago that he did not have the capacity to prosecute more than 4 million people who were on the radar of the FBR but had not filed their annual reports.
MP Najeebullah Haroon paid the highest amount of Rs 140.7million, 7.5% of his Rs 1.9 billion income. Senator Saifullah Abro came in second with Rs 60.7 million in national fundraising contributions on income of Rs 213 million. Its effective tax rate was 28.5%, as the tax had been paid by the association of persons in which it had interests.
Senator Talha Mehmood of Jamiat Ulema-e-Islam-Fazl (JUI-F) – the third highest-paying parliamentarian, paid 32.3 million rupees out of 180.3 million rupees in income at a rate of 18%. MP Sheikh Fayyazuddin paid 28 million rupees, only 1.7% of his total income of 1.7 billion rupees. Yet he was the fourth highest taxpayer in the parliamentary category.
Finance Minister Shaukat Tarin was the fifth highest taxpayer, who paid Rs 26.6 million in taxes on his Rs 304 million income in 2019, at the rate of 8.7%.
PML-N Chairman and Leader of the Opposition in the National Assembly, Shehbaz Sharif, paid 8.2 million rupees in tax, or 14.5% of his reported income of 56.4 million rupees , excluding tax agricultural income.
The RBF sets up a self-assessment tax system, where the taxpayer is free to declare his tax contribution. However, self-assessment is only successful if there is a strong tax audit regime.
All successive governments, including the current one of the PTI, have refrained from strengthening the audit wing of the RBF and the RBF does not have the human resources to conduct a taxpayer audit.
The Chief Minister of Punjab, Sardar Usman Buzdar, paid the meager sum of 2,000 rupees in normal income tax of 938,858 rupees at the rate of 0.2%. His case could be audited because the effective tax rate of 0.2% does not seem justifiable.
Sindh Chief Minister Murad Ali Shah paid 1.1 million rupees, or 3.3% of his income of 33.5 million rupees, which also seems too low. Shah also declared another 24.2 million rupees as farm income on which he could have paid tax in the province. After adding farming income, his total income for 2019 was Rs 57.7 million.
Khyber-Pakhtunkhwa Chief Minister Mahmood Khan paid Rs 66,258 on income of Rs 2.5million, bringing his effective rate to just 2.6%, while Balochistan Chief Minister Abdul Quddus Bizenjo, paid Rs 1.1million out of Rs 7.9million – at 13.5% tax rate.
Former President Asif Ali Zardari paid 2.2 million rupees, or 1.5% of his regular annual income of 146.6 million rupees. After adding farm income, the former president’s total annual income was Rs 282 million, according to the directory.