Pakistan politicians engulfed by tax evasion storm

Majority of ministers have not paid into national coffers beyond contribution taken from state salaries, alleges tax report

Nearly 70% of Pakistan's politicians, including some of the country's wealthiest people, did not file tax returns last year, according to a report that shines a light on a longstanding problem that reaches to the top of society. According to an investigation published on Wednesday, the vast majority of MPs, cabinet ministers and Pakistan's famously affluent president, Asif Ali Zardari, have not paid tax owed to the desperately cash-strapped government. The report, by the Centre for Investigative Reporting and the Centre for Peace and Development Initiatives, comes at time of deepening economic crisis in a country that collects just 9% of its national wealth in tax – almost matching Afghanistan as one of the lowest rates in the world. Tax dodging is rife among Pakistan's 180 million population; just 2% are registered within the tax system but fewer actually pay it. Critics say the rich and powerful are some of the worst offenders and are effectively subsidised by the poor. "Those who make revenue policies, run the government and collect taxes have not been able to set good examples for others," says the Representation Without Taxation report. It found 69% of national assembly members and 63% of senate members did not file tax returns in 2011. Although they are automatically taxed on their basic state salary, by failing to declare any additional wealth they would have been able to evade paying tax. According to a 2009 study, the average wealth of a member of the national assembly was well over £500,000. Under Pakistani law, tax must be paid on income in excess of £3,200. With little revenue to support the national budget, the government has been forced to borrow huge amounts from its banks. Many analysts fear Pakistan's threadbare public finances are unsustainable and yet another bailout by foreign donors could be imminent. The latest research, led by journalist Umar Cheema, is based on the personal tax numbers politicians must include on their nomination papers when standing for election. The figures were used to track down tax filings, most of which were unofficially divulged by staff within the federal board of revenue. Just two politicians voluntarily replied to researchers asking for their tax details, the report says. According to the report, 73 members of the national assembly did not even have a personal tax number at the time of the last election in 2008. In the current cabinet of 55 ministers, only 21 filed tax returns, the report alleged, and those who were taxed paid very little, with only 9% of national assembly members paying more than $6,400 (£4,000). Mushahid Hussain Sayed, a member of the senate, paid just 82 rupees – about 50p. In an email to Reuters, Sayed disputed the report, saying he had paid $6. "I was not a senator then; my source of support was from my family's agricultural income and lecture honoraria," he said. Zardari did not file a tax return in 2011, according to the database of Pakistan's tax collectors, although the report said his spokesman insisted he had. Many parliamentarians are feudal landlords who own vast estates giving them huge incomes and armies of workers who vote for them. However, income from agricultural production is tax exempt. The government plans to launch an amnesty allowing tax evaders to register their untaxed wealth by paying a flat penalty of up to £380. Although it will cost the state millions of pounds in lost revenue, officials think it will reel more people into the tax net. Pakistan has long struggled with tax evasion by the rich and powerful. In a 1986 speech, Zia-ul-Haq, the former military dictator, said if Islamic law called for the amputation of the hands of thieves, tax evaders should have their entire arm cut off. But, as the report notes, Zia failed to file a tax return between 1960 and 1988.