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In Pakistan, Tax Evaders Are Everywhere — Government Included

Dec 19, 2012
Originally published on December 19, 2012 8:32 pm

Tax evasion is a chronic problem in Pakistan — only about 2 percent of the population is registered in the tax system, and the government collects just 9 percent of the country's wealth in taxes, one of the lowest rates in the world.

But now a new investigative report is making headlines. It says that just a third of the country's 446 federal lawmakers bothered to file income tax returns last year.

"Tax evasion is a social norm in Pakistan," says Umar Cheema, a reporter for the Pakistani English-language newspaper The News, and a founder of the Center for Investigative Reporting in Pakistan, whose first project is this report. "They are tax evaders. They are tax dodgers. And those who are paying some amount, it doesn't match with their living style. They live like [a] prince, and they pay like a poor man."

One of those who reportedly skipped filing was Pakistan's president, Asif Ali Zardari.

Zardari's spokesman has said the president did pay taxes last year, though he has yet to provide public proof of doing so. Cheema says he learned about Zardari and the other politicians with old-fashioned gumshoe reporting and a combination of publicly available data and questionnaires he sent to lawmakers.

Officials inside the tax bureau quietly passed along information as well.

Cheema's report doesn't take into account the taxes politicians pay on their parliamentary salaries; those taxes are automatically deducted from their paychecks.

The report focuses instead on supplementary income — what lawmakers make on their properties and businesses outside their parliamentary duties, many of which they do not declare.

The report's findings made banner headlines in all the major Pakistani newspapers last week.

Naseer Rajput was shopping at a local market in Islamabad and said he was outraged.

"A poor man pays all his taxes, and those who get elected to become our rulers evade taxes. But they expect their people to pay?" Rajput says.

Mohammed Farooq, 40, agrees. He says he pays his taxes, and so should leaders.

"I have been a taxpayer since 1992 and submit my returns regularly, and pay taxes regularly," Farooq says.

Hundreds of thousands of people have made money illegally, and the tax authorities never question them, he says. They don't ask how they got their luxury vehicles or how they got their big houses — and maybe they should, he adds.

This is the kind of discussion Cheema was hoping to inspire.

"It has put on alert the people in Pakistan and abroad, and people realize in Pakistan who they are voting for," Cheema says.

Cheema says the tax payments for those who did file on their supplementary incomes are laughably small.

Last year, Mushahid Hussain Sayed, a member of the Senate, paid just 82 rupees — a little less than $1 — in taxes, the report says.

In an email to Reuters, Sayed disputed the report, saying he actually had paid $6.

Cheema says that taxes are more than just money.

"This tax payment is something that establishes your relationship with the state, and when you don't pay your taxes, your relationship with the state ceases to exist," Cheema says.

Cheema plans to revisit the issue in the spring, when the Pakistani election is likely to be called. He hopes to make taxes a campaign issue.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

A new investigative report is making headlines in Pakistan. It's about taxes. Tax evasion is a national problem in Pakistan. Only two percent of the population pays its taxes. For the first time, this report lays out in detail how little the country's politicians are paying.

NPR's Dina Temple-Raston has the story from Islamabad.

DINA TEMPLE-RASTON, BYLINE: Just a third of the country's 446 federal lawmakers bothered to file income tax returns last year, according to the new report. And among the leaders who reportedly skipped filing, the Pakistani president, Asif Ali Zardari.

UMAR CHEEMA: Tax evasion is a social norm in Pakistan.

TEMPLE-RASTON: A social norm, said Umar Cheema, a reporter for The News and the founder of the Center for Investigative Reporting. This report is their first project.

CHEEMA: They are tax evaders. They are tax dodgers. And those who are paying some amount, it doesn't match with their living style. They live like prince and they pay like a poor man.

TEMPLE-RASTON: Zardari's spokesman said the president did pay taxes last year, but he has yet to provide any public proof of doing so. Cheema said he learned about Zardari and the other lawmakers with old-fashioned gumshoe reporting, in a combination of publicly available data and questionnaires he sent to lawmakers. Officials inside the tax bureau quietly passed along information as well.

And while Cheema speaks in terms of tax dodgers, that is exactly right. The report doesn't take into account the taxes politicians pay on their parliamentary salaries; those taxes are automatically deducted from their paychecks.

What the report focuses on instead is supplementary income - what lawmakers make on their properties and businesses outside their parliamentary duties, many of which they do not declare.

The report's findings made banner headlines in all the major Pakistani newspapers last week. Naseer Rajput was shopping at a local market in Islamabad and he said he was outraged.

NASEER RAJPUT: (Through Translator) A poor man pays all his taxes. And those who get elected to become our rulers evade taxes. But they expect their people to pay?

TEMPLE-RASTON: Forty-year-old Mohammed Farooq agreed. He said he pays his taxes and so should leaders.

MOHAMMED FAROOQ: (Through Translator) I've been a taxpayer since 1992 and submit my returns regularly and pay taxes regularly.

TEMPLE-RASTON: Hundreds of thousands of people have made money illegally, and the tax authorities never question them, he says. They don't ask how they got their luxury vehicles or how they got their big houses. And maybe they should, he added.

This is the kind of discussion journalist Umar Cheema was hoping to inspire.

CHEEMA: It has put on alert the people in Pakistan and abroad, and people realize in Pakistan that who they are voting for.

TEMPLE-RASTON: Cheema says the tax payments for those who did file on their supplementary incomes are laughably small. Last year, Mushahid Hussain Sayed, a member of the Senate, paid just 82 rupees - a little less than a dollar in taxes, the report said. In an email to Reuters, Sayed disputed the report, saying he actually had paid $6.

Cheema said that taxes are more than just money.

CHEEMA: This tax payment, it is something that establishes your relationship with the state. And when you don't pay the taxes your relation with the state ceases to exist.

TEMPLE-RASTON: Cheema plans to revisit the issue in the spring, when the Pakistani election is likely to be called. He hopes to make taxes a campaign issue.

Dina Temple-Raston, NPR News, Islamabad. Transcript provided by NPR, Copyright NPR.