Huzaima Bukhari & Dr. Ikramul Haq
Failure of the coalition of Pakistan Tehreek-i-Insaf (PTI) vis-à-vis economic governance, changing four finance ministers and five chairpersons of Federal Board of Revenue (FBR) during its tenure since August 2018 has been in the media for the last many days. However, no one has noticed the failure to publish tax directories for tax years 2019 and 2020 [one exclusively for parliamentarians and another for all taxpayers] till today. These directories became an annual feature when in these columns, the issue of payment of meagre income tax by elected parliamentarians and the rich and mighty was raised in Tax delinquents, Business Recorder, January 4, 2013, Allying with tax evaders, Business Recorder, January 25, 2013 and ‘Tax Directory for all’, Business Recorder, January 10, 2014.
It was specifically mentioned in ‘Tax Directory for all’ as under:
“The process of accountability in Pakistan must start with scrutinizing of declaration of assets, liabilities and taxes paid by politicians, high-ranking civil and military officials and judges. The civil society and media should come forward to force the parliament to abolish all laws relating to secrecy and/or immunity and enact a comprehensive legislation for obtaining information by any citizen under Freedom of Information Law. FBR should be authorised by the federal government to publish annual tax directory (it was done only in 1993 and 1994). This step will not only expose the rich and mighty who have amassed wealth, have failed to pay taxes under the law, but will also help to promote the much-needed tax culture”.
In the wake of above, the then government published tax directories of parliamentarians and for all taxpayers for tax year 2013 on February 28, 2014 and for tax year 2014 on June 15, 2014, many months after publication of the above articles. Since then it became a regular practice to publish these tax directories within reasonable time. However, the PTI Government has been delaying publication and has yet not published directories for tax year 2019 and 2020. The last date for filing of returns for tax year 2020 was extended till December 8, 2020. Each year’s directories of parliamentarians and all other taxpayers since tax year 203 are available at: https://www.fbr.gov.pk/Categ/income-tax-directory/742
In ‘Tax Directory for all’, the following was also highlighted:
“The Federal Finance Minister should direct and authorise the FBR to publish (in digital and printed form) ‘Tax Payers’ Directory’ (covering both income tax and sales tax) of all persons. Section 216(1) of the Income Tax Ordinance, 2001 says that all particulars contained in any statement made, return furnished, or accounts or documents produced or any evidence given, or affidavit or deposition made, in the course of any proceedings under this law or any record of any assessment proceedings or any proceedings related to recovery of a demand shall be confidential and no public servant save as provided in this Ordinance may disclose any such particulars. There are many exceptions to this rule as contained in sub-sections (3), (4) and (5) of section 216. For example, it is clearly provided in sub-section (5) that nothing contained in sub-section (1) of section 216 shall prevent the Board from publishing, with the prior approval of the Federal Government, any particulars filed by any taxpayer and sub-section (6) in categorical terms states: “Nothing contained in sub-section (1) shall prevent the Federal Government from publishing particulars and the amount of tax paid by a holder of a public office as defined in the National Accountability Bureau Ordinance, 1999 (XVIII of 1999).”
It is now an admitted fact that in 2011 about 70% of Pakistani legislators—members of Senate and National Assembly—did not comply with section 116(2) of the Income Tax Ordinance, 2001 by not filing tax returns, wealth statement and personal expenses having taxable income of Rs. 500,000…. Thus in elections of 2013, these tax delinquents managed to contest and succeed at many places.”
[underlined for emphasis]
It is still not made public why the PTI Government deferred/delayed publication of tax directories for tax year 2019 that could have been released along with those for tax year 2018 as already long overdue and why tax directories for tax year 2020 are still not released. In the tax directories for tax year 2019 and 2020, the agriculture income declared by parliamentarian and others should also be mentioned in a separate column so the citizens can see that though this is chargeable to tax under the respective provincial laws, where taxpayer is assessed or assessable, but in income tax returns, if tax is not paid on it, it becomes taxable as provided in Proviso to section 111(1) of the Income Tax Ordinance, 2001 as under:
“Provided that where a taxpayer explains the nature and source of the amount credited or the investment made, money or valuable article owned or funds from which the expenditure was made, by way of agricultural income, such explanation shall be accepted to the extent of agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law”.
[underlined for emphasis]
On September 18, 2020, FBR released ‘Parliamentarians’ Tax Directory for Tax Year 2018’ and ‘Tax Directory of all Taxpayers for Tax Year 2018’ after delay of many months. The analysis of these and Tax Directory Analysis for year ended 2018 (first time published by FBR on the basis of returns received up to 14th September 2020) was published in two parts (FBR’s Tax Directory: Startling facts and fallacies—I, Business Recorder, October 2, 2020 and FBR’s Tax Directory: Startling facts and fallacies—II, Business Recorder, October 4, 2020). The data contained in the directories for tax year 2018 in majority cases was for fiscal year 2017-18 (ending June 30, 2018) and in the case of taxpayers having calendar year as special tax year for accounts made as on December 31, 2017. Returns for tax year 2018 became due after PTI came into power on August 18, 2018. The delay in publishing of tax directories was due to extension given by the PTI Government in filing of returns and not by the government of Pakistan Muslim League (Nawaz)—PMLN. The National Assembly passed on May 18, 2018 Finance Bill 2018, presented by PMLN Government, containing two laws, earlier promulgated through Presidential Ordinance, relating to asset-whitening, namely, Foreign Assets (Declaration and Repatriation) Act, 2018 and Voluntary Declaration of Domestic Assets Act, 2018,with the assurance of“complete confidentiality”,notrevealing the names of beneficiaries that included even public officeholders prior to 10 years and no probe to the extent of assets declared under these laws.
Both the laws, patently against Article 19A of the Constitution of Islamic Republic of Pakistan [“the Constitution’], became part of Finance Act, 2018, receiving the assent of President on May 22, 2018. When secrecy was guaranteed, how could assets created from proceeds of crime be ascertained for determining ineligibility, especially when public office holders “who is or has been, during the preceding ten years” were specifically debarred? This was decriminalizing financial crimes committed against the State after lapse of ten years by public officeholder! These were also unconstitutionally passed as such laws could not have been presented as Money Bill in the light of judgement of the Supreme Court of Pakistan in Workers Welfare Funds m/o Human Resources Development, Islamabad through Secretary and others v East Pakistan Chrome Tannery (Pvt.) Ltd through its GM (Finance), Lahore etc. and others[(2016) 114 TAX 385 (S.C. Pak.)].
Even otherwise, the above laws could not override the National Accountability Bureau Ordinance, 1999 (NAB Ordinance) that applies from January 1, 1985, being special law overrides any such laws as held by Supreme Court of Pakistan in Amjad Qadoos v Chairman Accountability Bureau (NAB) Islamabad & Others 2014 SCMR 1567 as under:
“In our opinion the answer to this controversy would be to determine whether or not any of the statutes is a special statute which would then either prevail over the other one or if both are special statutes then what would be the situation. In this regard reference can be made to the case of Messrs Elahi Cotton Mills Ltd. and others (supra) in which it has been held in no uncertain terms that the Income Tax Ordinance is a general statute qua the Economic Reforms Ordinance, 1992 and hence the provisions of the latter would prevail. Similarly it was held in the case of Khan Asfandyar Wali and others (supra) that the NAB Ordinance was a special statute and hence would prevail over the general laws although at the same time certain provisions thereof were struck down and certain recommendations were made to the Federal Government to amend the same. Finally in the case of I.G. HQFrontier Corps and Others (supra) it has been held that a special law would prevail over a general law although it has been enacted after the said general law. In view of the foregoing discussion we have no hesitation in holding that the NAB Ordinance is a special law and hence would prevail over the provisions of the Income Tax Ordinance being the general law”.
The PML which was ending its tenure on May 31, 2018 was very keen to pass these amnesties when only 15 days were left for leaving government for the next one. Through 82,889 declarations both these schemes fetched only Rs. 124 billion (domestic Rs. 77 billion and foreign Rs. 47 billion), though the then Adviser to Prime Minister on Revenue, Haroon Akhtar khan, claimed that collection would not be less than US$ 5 billion for foreign assets alone. In the Finance Act, 2019, the PTI government also passed Asset Declaration Act, 2019, earlier promulgated on May 15, 2019 as Asset Declaration Ordinance, 2019. It followed the same definition of “public officeholders” as by laws passed unconstitutionally passed by National Assembly under the PMLN Government.
The PTI scheme was for undisclosed assets, held in Pakistan and abroad, acquired up to the 30th June, 2018 or expenditure incurred or benami assets held, or undisclosed sales. The date of compliance was June 30, 2019. About 56 people, whose data was shared under Tax Information Exchange Agreements (TIEAs), initiative of Organisation for Economic Co-operation and Development (OECD), availed the PTI’s tax amnesty scheme and declared Rs. 31.8 billion worth of assets. They paid only Rs. 1.7 billion and got a relief of Rs. 20.6 billion. The returns received and amount paid under this scheme must also be appearing in Tax Directory Analysis for Tax Year 2018 as it claims the deadline is September 14, 2020 of all returns received for tax year 2018.
The PTI Government must tell the nation whether any public officeholder availed the benefit of above laws and whether their names were included in ‘Parliamentarians’ Tax Directory for Tax Year 2018’ and ‘Tax Directory of all Taxpayers for Tax Year 2018 or not. The NAB must also seek this information to assure no public officeholder escapes punishment under the NAB Ordinance.
Besides above, another possible reason for PTI Government not to publish tax directories for tax year 2019 and 2020 is to hide its failure on revenue front. The target assigned to FBR for fiscal year 2018-19 was Rs. 4435 billion, which was revised downwards twice [first to Rs. 4398 billion and then to Rs. 4150 billion].According to FBR Year Book 2018-19, FBR collected Rs. 3828.5 billion that was “0.4% lesser than the collection of previous fiscal year”. This pushed the fiscal deficit to record 8.9% of GDP (Rs. 3.45 trillion). For fiscal year 2019-20, it was reduced to 8.1% of GDP (Rs. 3.37 trillion) by blocking refunds of Rs. 710 billion. The PTI government during its first two years in power incurred tax expenditure cost of Rs. 2.12 trillion [Analysing ‘tax expenditure’, Business Recorder, June 26, 2020].
The PTI Government also published ‘Parliamentarians Tax Directory for the year ending 30 June 2017’and ‘Tax Directory for the year ending 30 June 2017’ as late as on February 22, 2019,(these were tabulated from returns filed manually and electronically till February 21, 2019 for tax year 2017). The PTI Government could have released directories for tax year 2017 and 2018 simultaneously, but it delayed tax directories for 2018 till September 18, 2020 to show “impressive” performance by taking into account returns filed up to September 14, 2020 for tax year 2018. It is now understandable as to why the PTI Government is not publishing tax directories for tax years 2019 and 2020, which are long overdue.
Another reason may be meagre income tax received from the total number of income tax filers for tax year 2020 till April 8, 2021. Only 2,81,6694 paid Rs. 50.5 billion as per details below:
- Individuals: 2,648,709: tax= Rs. 25 billion
- Association of Persons (AOP): 72,048: tax= Rs. 4 billion
- Companies: 54,140: tax=Rs. 21.3 billion
- 41,743 filed returns manually and paid Rs. 15 million
- The number of “active” income tax return filers as per Active Taxpayers List (ATL) on FBR’s website [data updated every Monday], was 2,573,093 as on the latest date (April 19, 2021) increase of 66,354 since April 8, 2021.
- According to FBR many filed returns late but did not pay default surcharge to be eligible to appear in ATL.
FBR has not disclosed the numbers in above manner in its latest Year Book: 2019-20 or thereafter in any quarterly statement or its website. According to the latest data available on the website of Pakistan Telecommunication Authority (PTA), the total number of cellular subscribers as on January 31, 2021 were 180 million (84% teledensity), out of which 95 million were 3G/4G subscribers (44.5% penetration), 2 million basic telephony users (1.3 teledensity) and 98 million broadband subscribers (45.6% penetration). FBR should determine income tax base from the data of about 100 million unique mobile users (many have more than one numbers) using details of their calling patterns, bills, handset ownership status, assets, travel abroad, payment of utility bills, fees for children etc. All of them are paying advance adjustable income tax of 12.5%. Those not chargeable to income tax under the law, cannot be subjected to advance tax as held by Lahore High Court in Union Bank Ltd. v Federation of Pakistan (1998) 77 TAX 125 (H.C. Lah.) and Lone Cold Storage, Lahore v Revenue officers, Lahore Electric Power Co., and others (2011) 103 TAX 5 (H.C. Lah.).
The newly-appointed Finance & Revenue Minister, Shaukat Fayaz Ahmad Tarin and Prime Minister must take note of extreme injustice inflicted on millions by payment of advance income tax when they are not chargeable to tax. The Supreme Court of Pakistan held in Commissioner of Income Tax, Lahore and others v Messrs Prosperity Weaving Mills (Pvt.) Ltd and others 2011 PTD 159 (S.C. Pak.) that if a person is not taxable, advance tax cannot be collected as well and this is binding under Article 189 of the Constitution. In the existing extreme hardship days, especially after the third deadly wave of covid-19 endemic, advance income tax on mobile and internet use from those having no income or below taxable limit or exempt, must be waived and amounts already collected for all previous years should be refunded immediately without filing of returns using the same data portal as for Ehsaas Emergency Cash Programme.
The writers, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS).