Public manifesto—II

First reform thyself!

Dr. Ikramul Haq

It is shocking that only two political parties have filed income tax returns for tax year 2022 out of 27 registered with Federal Board of Revenue (FBR) and 130 with Election Commission of Pakistan (ECP) despite section 114(1)(ac) of the Income Tax Ordinance, 2001 that makes it mandatory for all of them to file the same.Politicians keep on bashing FBR but do not fulfill the constitutional command. How can we expect rule of law in Pakistan, when 128 political parties are committing flagrant violation of Article 5(2) of the Constitution of Islamic Republic of Pakistan, “Obedience to the Constitution and law is the inviolable obligation of every citizen wherever he may be and of every other person for the time being within Pakistan”.

It is now confirmed by accessing (on January 25, 2023 at 6 pm) and downloading the Active Taxpayers List (ATL) of FBR that the three leading parties of Pakistan, Pakistan Tehreek-i-Insaf (PTI), Pakistan Muslim League (Nawaz) [PMLN] and Pakistan Peoples Party (PPP), are not included in the list of filers. Shockingly, political parties, with the exception of just two, have not been filing income tax returns, which is their legal obligation and also command of the Constitution’ vide Article 17(3) that says, “Every political party shall account for the source of its funds in accordance with law”.

In India, section 13A of Income Tax Act, 1961 requires political parties to file returns. It confers tax-exemption to a registered political party subject to the following:

1. maintains such books of accounts and other documents enabling the tax officer to properly deduce the income therefrom;
2. for each such voluntary contribution [other than contribution by way of electoral bond] in excess of INR 25,000, keeps and maintains a record of such contribution and the name and address of the person who has made such contribution;
3. the accounts are audited by the certified chartered accountant; and
4. any donation in excess of INR 2,000 by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bond (that is, cash donation in excess of INR 2000 is not allowed—with effect from assessment year 2018-19.

The Chief Election Commissioner of India seeks from the Indian Central Board of Direct Taxes detail scrutiny of accounts submitted by political parties. The Central Information Commission of India directs Income Tax Department to disclose in public interest, details of all providing funds to political parties in their tax returns. With this information in public domain, the Commission ensures transparency in the funding of both small and big parties, besides blocking the flow of black money in the electoral process.

In Pakistan, neither ECP nor FBR has ever bothered to consider the above vital matter. The ECP must also make public, accounts filed by political parties under section 210 of Election Act, 2017 read with Rule 159 of the Election Rules, 2017.

It is high time to enforce filing of tax returns by all registered political parties, which should be scrutinised and made public, with any citizen having the right to question their veracity. Donations received by parties should qualify for tax credits,

Political parties are treated as non-profit organisations all over the world, working for public good. In Pakistan we have not yet promoted the idea that political parties should be exemplary non-profit organisations fully committed to further the cause of public consciousness and welfare on all matters related to governance.

This idea is important from many angles. Once people associate themselves with a particular party having clear objectives and aims, they also extend financial support for their achievement, thus eliminating the influence of undesirable financiers—people with money power taking control of parties for personal gains. Meaningful participation of masses in democracy and electoral process can only be ensured if they have the right to question their leaders about use of their money. This would also make the party a responsible and accountable entity when in power. All political parties must make it part of their election manifestos for 2023.

Politicians need to act responsibly in all spheres—whether in power or in opposition. Their role is pivotal for effective working of State institutions. Being role models, it is imperative for them to show by their conduct, supremacy of rule of law. If they indulge in corruption and malpractices, the entire political system becomes polluted/discredited. Admittedly and rightly their main focus has always been on capturing power. There is nothing wrong about it. But once in power, promoting nepotism and/or amassing wealth and power through unlawful means is what destroys democracy. While in power, they should demonstrate by their actions that they are custodians of public faith and are bound to work for public cause and not personal gains. Why have they failed to do so in Pakistan? The main causes are authoritarianism within the parties, no respect for merit and absolute lack of accountability. Presently, almost all political parties in Pakistan are controlled either by a single person or a handful of individuals with workers showing loyalty to their “chief” rather than to the party’s manifesto/programme. Obviously, in return, they expect personal favours from the “chief” when the party assumes power.

There is formidable resistance from politicians against establishment of an independent accountability authority in Pakistan as they know that such a body would expose their corruption and end their control over the State. The way forward is that political parties should be forced to keep proper accounts, get them audited by reputed firms and file income tax returns. Once this is made mandatory under the law, they would have no option but to take into their folds only those people who honestly discharge their tax obligations. The process of filtration within the parties is a necessary step towards a transparent and democratic set-up.

If Pakistan has to emerge from the prevailing political mess, democratisation of political parties is a must. Political life of an individual requires that he complies with all laws of the land—one demonstrative proof of it is to discharge fiscal obligations. If a politician does not pay his taxes honestly then how can he expect ordinary citizens to do the same?

Lack of tax culture in Pakistan has its roots in the open defiance of tax laws by the rich and mighty. Not only have they kept themselves outside the tax ambit, they also take pride in telling others that tax officials dare not question them. For them this vulgar show of power is necessary to emphasise why they are superior to the meek common folk and thus have unchallengeable right to rule. With this mindset, the rulers in Pakistan have turned the country into their personal fiefdom, desiring it to be inherited by their offspring.

Next week necessary reforms in public finance management to make Pakistan a self-reliant entity will be presented.

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The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE)