Representation without taxation

[VetDoctor]

Representation without taxation
Dr Ikramul Haq

Many members of parliament, who are under oath to act within the bounds of the supreme law of the land, have been violating tax laws by not filing tax returns or, instead, declaring laughable incomes.
The study ‘Representation without taxation’, released by the Centre for Investigative Reporting in Pakistan (CIRP) on December 12, 2012 is an eye-opener. According to the investigation conducted by the founder of CIRP, Umar Cheema, “there are 104 senators; only 38 of them filed tax returns and 65 did not. One senator from the calamity-hit area claimed in his nomination papers (that) he was exempt from income tax. Among the non-filers were 11 senators elected in March 2012. They claimed paying taxes in 2011 in their nomination papers. However, the FBR database hosting the record of the return filers does not support their claim. Nevertheless, the tax details obtained from the nomination papers have been enlisted”.
It is claimed in the report that “in both Houses of Parliament, the Senate and National Assembly, there are 446 lawmakers and 300 of them have turned out to be tax-dodgers. Among them are those 88 MPs who don’t have National Tax Number (NTN), let alone pay income tax. There are 16 MNAs whose taxes couldn’t be examined due to lack of basic information like NTNs and Computerised National Identity Card (CNIC) numbers – one senator from a calamity-hit area claimed tax exemption and one National Assembly seat is vacant”.
This name and shame game in tax matters should not be confined to the members of parliament alone, and must cover all the powerful segments of society. Pakistan has many laws concerning disclosure of assets and liabilities by government servants, holders of public offices, elected members of assemblies and persons desirous of contesting elections.
Politicians and political parties in Pakistan are subject to various laws that require them to file annual accounts and declaration of assets and liabilities. Rule 4 of the Political Parties Rules, 2002 requires that “every political party shall maintain its accounts in the manner set-out in Form-I indicating its income and expenditure, sources of funds, assets and liabilities and shall, within sixty days from the close of each financial year (July-June), submit to the Election Commission a consolidated statement of accounts of the party audited by a chartered accountant, accompanied by a certificate, duly signed by the party leader to the effect that no funds from any source prohibited under the Order were received by the party and that the statement contains an accurate financial position of the party”.
It is painful to note that none of the political parties have displayed accounts submitted under Rule 4 of the Political Parties Rules, 2002 on their websites. It is the duty of the Election Commission of Pakistan (ECP) to enforce strict compliance of this rule and moral obligation – if not statutory – of all political parties to publish the same in newspapers or post on their websites so that party workers, donors and voters are clear about their financial matters.
Section 42A of the Representation of People Act, 1976 and Section 25A of the Senate (Election) Act, 1975 make it mandatory for elected representatives to file details of their assets and liabilities on the closing date of each financial year. A failure to fulfil this obligation leads to disqualification. Pakistan Institute of Legislative Development and Transparency (Pildat) published a comprehensive report about these legal provisions and their compliance. It is sad to note that there are gross violations of these laws by elected members. Through a notification on October 21, 2011, the ECP suspended as many as 222 lawmakers for failing to submit details of their assets.
Section 116 of the Income Tax Ordinance, 2001 also requires filing of wealth statements and declarations of personal expenses in the prescribed manner for all individuals whose last assessed or declared income is Rs1 million or more [up to tax year 2011 this limit was Rs500,000]. This means that all persons in the service of Pakistan, holding public offices and elected representatives with this level of income must file wealth statements conforming to their declaration of assets and liabilities filed under the laws mentioned above. The report (http://www.cirp.pk/download.htm) released by CIRP exposes the massive non-compliance of this provision of law by a majority of the parliamentarians. The CIRP must conduct a similar study of high-ranking state functionaries, including men in khaki and robes.
In light of the CIRP report, it is necessary to constitute a non-partisan Parliamentary Standing Committee on Asset Disclosures & Investigation to inquire into matters relating to assets disclosure by elected representatives. The committee should examine the data of the Federal Board of Revenue (FBR); the Income Tax Ordinance, 2001 also contains detailed provisions for probing sources of acquisition of assets.
The issue of declaring tax returns should be resolved democratically. First of all, FBR should be obliged by law to convey all declarations filed by persons in the service of Pakistan, holding public offices and elected representatives to the Parliamentary Standing Committee on Asset Disclosures & Investigation. The committee can compare declarations filed under the Civil Servants Act 1973, Army Act 1952, Representation of People Act 1976, the Senate (Election) Act 1975, and Rule 4 of the Political Parties Rules, 2002 with those filed under the income tax law. In case of any discrepancies or complaint of suppression and concealment, the committee can ask FBR, NAB, FIA, MP, military court, as the case may be, to take action under law. The ECP has no power to investigate the veracity and sources of assets submitted to it.
There should be a provision in the Income Tax Ordinance, 2001 for political parties making it incumbent on them to file their tax returns. Their income should be exempt from tax, provided they voluntarily file returns and present audited accounts for scrutiny. Such provisions exist in tax laws of all the major democracies. In India not only does this law exist [Section 13A of Income Tax Act, 1961] but recently the Chief Election Commissioner of India, SY Qureshi, asked the Indian Central Board of Direct Taxes (CBDT) to scrutinise accounts submitted by political parties. Earlier, the Central Information Commission of India directed the Income Tax Department to disclose – in public interest – those details of donors that were given by political parties in their tax returns. With this information in the public domain, the commission said, there would be transparency in the funding of both small and big parties, besides checking the flow of black money in the electoral process.
We should start the process of across-the-board accountability in Pakistan by scrutinising declaration of assets, liabilities and taxes paid by politicians, high-ranking civil and military officials and judges. The civil society and the media should come forward to force parliament to abolish all laws relating to secrecy and/or immunity and enact a comprehensive legislation granting the right to any citizen to obtain such information.
The accountability of the powerful in our society should be initiated through a law making it mandatory for the FBR to publish an annual tax directory as was done in 1993, disclosing details of taxes paid by salaried and non-salaried persons. This step will help expose those rich and mighty who have amassed enormous wealth, but are not filing their tax declarations under the law. Election laws should also be amended debarring tax delinquents from contesting elections.
The writers are tax lawyers and adjunct professors at Lahore University of Management Sciences (LUMS).
Emails: huzaima@huzaimaikram.com and
ikram@huzaimaikram.com