A tax for the poor that rich never paid

Dr. Ikramul Haq

The fiscal woes of Pakistan are due to naked defiance of the rich to pay due taxes on their enormous incomes/wealth. A progressive tax (Income Support Levy), legislated in 2013, remains unpaid till today by 99% parliamentarians and rich Pakistanis.  The Federal Boar of Revenue (FBR) has failed to collect it from the defaulters—many of whom are criticizing the government of Pakistan Tehreek-i-Insaf (PTI) for going to the International Monetary Fund (IMF) against its vowed policy.  Rich businessmen, who are seeking more “concessions” from PTI government, by not paying Income Support Levy, meant for helping the economically distressed persons/families, proved their apathy and callousness. This progressive tax was abolished in 2014—in 2017-18 Pakistan suffered record fiscal deficit of Rs. 2.3 trillion forcing PTI government to borrow funds just to pay old debts!

Parliamentarians enjoying exclusive power to levy taxes under Article 77 of the Constitution almost en bloc did not pay a tax they themselves imposed—this is height of indignity and disgrace. This needs to be debated publically—the Supreme Court may also take suo muto action in the light of Article 62 and 63 of the Constitution against lawmakers who did not pay the due tax! People ask that if the mighty sections do not pay taxes, why they should suffer on account of harsh conditions of IMF hurting them and not the rich.

The yoke of IMF and debt enslavement are not merely economic issues. ‘Debtocracy’, a term yet to become part of public discourse, has far-reaching ramifications—a nation in ‘debt prison’ automatically suffers political subjugation. Thus, it is not surprising that IMF, in which the United States is the main shareholder, for negotiating a fresh bailout, is asking Pakistan for reduction in share of provinces from National Finance Commission Award (disturbing federal-provincial harmony achieved after 18th Constitutional Amendment) and revealing of complete details of terms and conditions for all loans/debts owed to China (attack on CPEC by USA through IMF as its economic hitman).

If a lender exploits a debtor and imposes conditions, it is considered justified as per the age-old adage: beggars cannot be choosers. This axiom aptly applies to Pakistan. Every government acts upon the advice of our infamous ‘revenuecracy’ (addicted on easy collection of indirect taxes and fond of favouring the rich through exemptions/amnesties/immunities/waivers) and lands in trouble. ‘Revenuecracy’ and donor-fed technocrats keep on singing the mantra of “more taxes” and improving “tax-to-GDP” ratio but never talk about the incontrovertible fact that Pakistanis are amongst the most heavily-taxed nations in entire Asia. About 85 million people not earning taxable incomes pay advance/adjustable income tax of 12% with prepaid mobile card/recharge. On the other hand, Income Support Levy meant for providing financial resources for an income support fund for the economically distressed citizens was not paid by the rich and was then abolished abruptly. This tax was payable along with wealth statement that was made mandatory for all persons for tax year 2013 but unlawful relaxation was given to the rich to avoid this tax through an amendment in the Income Tax Ordinance, 2001.   

According to Parliamentarian Tax Directory for Year Ended 2013, released by the Federal Board of Revenue (FBR) on February 28, 2014, out of 1172 parliamentarians (senators and members of national and provincial assemblies) hardly 10 members paid Income Support levy. The Parliament passed the Income Support Levy Act, 2013 with the following objective:

“Whereas it is desirable to provide financial assistance and other social protection and safety net measures to economically distressed persons and families;

And Whereas under the principles of policy as given in the Constitution of the Islamic Republic of Pakistan, the State is obliged to promote social and economic well-being of the people and to provide basic necessities of life;

And Whereas it is expedient to provide for financial resources for running an income support fund for the economically distressed persons and their families through a Levy to be called Income Support Levy……”

Shockingly, a tax meant for the poor of the poor was not paid by 1160 parliamentarians, including the incumbent Prime Minister and Finance Minister. Ishaq Dar, while proposing Income Support Levy in Budget Speech in 2013, said:

It is incumbent on all of us who are blessed with exceptional favors from Allah (SWT) to contribute to the welfare of those not so fortunate. Many of us who may have earned our assets while working abroad have negligible tax liabilities under the existing laws and double taxation treaties. Yet we must share the burden of helping our weaker segments of population. In order to mobilize additional resources for enhancing the income support program for the poorest families in Pakistan, it is proposed to impose a small levy on such persons. This levy shall apply on net moveable assets of persons on a given date @ of 0.5%. The receipts under this head will be credited to income support program of the government…Let me admit that I shall be amongst the first ones who will be hit by this levy. According to my estimation, I will have to pay an additional Rs.2.5 million on this count this year, but I will be too happy to make this contribution for the welfare of our poor people”.

However, Ishaq Dar in his budget speech of 2014 withdrew Income Support Levy on the pretext that his rich colleagues in the House and friends in business “did not accept this measure”. FBR even did not bother to recover it for 2013. Of course, IMF and other donors will not ask the government why the rich successfully managed to escape payment of a progressive tax. They, in fact, like governments that do not bring fundamental structural reforms in the existing tax system, burden the poor and ensure that dependence on them continues unabated. It is evident from the fact that despite taking loans and grants of billions of dollars since 1960s, the successive governments have failed to generate required resources through sustainable and equitable economic growth to eliminate fiscal deficit and alleviate poverty.  

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The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com; Twitter: @drikramulhaq