Paying taxes Pakistani style

[ANG]

Hi, no wonder the country is broke...

1.6m of 1.7m taxpayers are in lowest tax bracket | Newspaper | DAWN.COM


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1.6m of 1.7m taxpayers are in lowest tax bracketBy Mubarak Zeb Khan | From the Newspaper
(2 hours ago) Today
Clearly, over the past three years not many new taxpayers have stood up and been counted by the FBR.

ISLAMABAD: If official figures are to be believed, out of Pakistan’s 1.7 million taxpayers, around 1.6 million taxpayers pay about Rs21,000 each as income tax every year.

All of these people fall into the lowest tax bracket where their annual income tax is less than Rs500,000.

Even more interesting is the fact that this particular tax bracket has not gained many new entrants over the past three years; to be exact, statistics show that 1.663 million taxpayers paid less than Rs500,000 as income tax in 2008. This number went down to 1.478 million in 2009 and then back to 1.662 million in the tax year 2010.

Clearly, over the past three years not many new taxpayers have stood up and been counted by the FBR.

This is not the only staggering statistic compiled by the Federal Board of Revenue; less than 20,000 people in Pakistan earned enough to pay between Rs1 million and Rs5 million (10 lakhs to 50 lakhs) as their annual income tax in 2010, while 21, 077 taxpayers have paid annual income tax in the range of Rs0.5 million to Rs1 million (five to 10 lakhs) and earned the state exchequer a little over Rs13.5 billion.

This means that each of these 21,077 people paid an annual income tax of around Rs650,000. And this was the income tax bracket with the second highest number of taxpayers.

No wonder Pakistan is known for its low compliance level to income tax rules and international donors want the country to widen its tax base before asking the rest of the world for more aid and help.

Only 7,680 taxpayers earned enough to pay income tax in the range of Rs1 million to Rs1.5 million (10 to 15 lakhs). With a total collection of over Rs8 billion, each of these taxpayers contributed a mere Rs1.52 million to the government exchequer in the year.

Around 3,000 taxpayers paid income tax between Rs1.5 million and Rs2 million (15 to 20 lakhs) a year while 2,414 taxpayers paid tax in the range of Rs2 million to Rs2.5 million (20 t0 25 lakhs).

For the next tax bracket, the number of taxpayers dropped steeply. Only 1,526 people paid tax in the range of Rs2.5 million to Rs3 million (25 to 30 lakhs) followed by 838 taxpayers who paid Rs3.5 million to Rs4 million (35 to 40 lakhs) as annual tax in 2010.

The number reduces to a mere 602 when it comes to people who paid more than Rs4 million to Rs4.5 million (40 to 45 lakhs) as annual tax. And only 526 taxpayers paid up to Rs5 million (50 lakhs). Each of them contributed Rs4.5 million (45 lakhs) to the government; this is less than the amount that one would need to purchase a Prado Land Cruiser.

Also, there are only 4,426 taxpayers across Pakistan who declared income tax to be more than Rs5 million. However, FBR officials point out that this bracket includes corporate and other businesses.

Although the number of these taxpayers was low, their contribution in the total income collection stood at Rs286.023 billion during 2010 out of the total collection of Rs373.685 billion from 1.706 taxpayers.

In other words, income tax collection from Pakistan’s 1.6 million taxpayers remained Rs87.662 billion.

A senior tax official told Dawn that the introduction of universal self-assessment scheme (USAS), a scheme to allow taxpayers to determine their tax themselves without being questioned by the tax officials and in the absence of income tax audits, is among the reasons for the low level of tax payment in the country.

 

[ANG]

Hi, you are welcome to call me whatever you want, as I am a strong believer in free speech. No I am not a shadow Indian, not that there is anything wrong with being from India. I have posted may positive posts about the JF-17, PAF, PN, etc. However, I do not have to justify a thing to anyone.

I am an economist/statistician by trade. I am brutally honest when I see stupid economic policies, or economic malaise caused by preventable factors, or incompetence and corruption.

Pakistan is plain and simple, one of the most corrupt countries there is. It has bought its economic malaise on itself. I personally feel embarrassed when I see Pakistani government officials begging the IMF or the US or other countries for aid.

Pakistan is a country of 180M people and should be able to stand on its own feet. It has a proud history and has accomplished a lot when it has been under pressure. Pakistan has the lowest tax-GDP ratio anywhere, it has continuously run huge deficits due to this, and borrowed from anyone to keep afloat. My critism is against the government and institutions, not the people. That is all.

 

[President Camacho]

The President of Pakistan, Asif Ali Zardari’s proposal for a one-time tax, to help raise funds for flood victims has further angered the general population, already frustrated by the corruption and inaction of the government and state authorities.

Indeed, many are peeved by President Asif Ali Zardari’s proposal for a tax to be imposed on Pakistan’s "well-off" and "people of means", with several like 50-something accountant Munaf Lakda downright seething.


"I most definitely protest and would not pay the flood tax at all if I can avoid it," says Lakda. "Just pick up their (ruling elites) income tax returns and compare it to mine – it’s ridiculous how little they pay, if they pay at all!"

"It is another gimmick to skin the poor middle class who are already going through a tough time to make both ends meet," Fouzia Mapara, a young journalist, adds.

It is not that Pakistanis are not generous lot, since many have expressed willingness to help the estimated 18 million people affected by the floods that inundated large parts of Pakistan two months ago. Zardari’s tax proposal, however, has hit a raw nerve in this South Asian country where government officials are among those said not to be paying the proper amount of taxes.

A report on Pakistan's taxation system by the Washington DC-based Carnegie Endowment for International Peace confirms that fewer than three million of Pakistan’s 180 million people pay any income tax. It also says the country’s tax- to-GDP ratio stands at just nine percent.

According to economist Haris Gazdar, a tax-GDP ratio is low "in 'strong arm' military governments as well as 'weak' civil governments". Akbar S Zaidi, the Pakistani economist who authored the Carnegie report, writes, "Pakistan’s lack of a proper tax and revenue regime has resulted in high rates of tax evasion, burdening the country with unsustainable debt and undermining its development priorities."

Pakistan’s tax system is apparently so dismal that in September 2010, the country’s biggest creditor, the International Monetary Fund (IMF), told Finance Minister Abdul Hafeez Sheikh that an 11-billion-dollar emergency loan programme would be frozen until Pakistan fixed its tax collection system.

Zardari probably did not expect the generally negative reaction to his proposal. But as Quaid-e-Azam University physics professor Pervez Hoodbhoy explains, "Because documentation exists, the salaried class is the only segment of society that actually pays taxes. To milk it further will produce much resentment."

Hoodbhoy, for his part, proposes "a flat one-time tax on urban property and agricultural lands at one percent of the current market price".

Yet, he also believes the current furore over the elite’s supposed non-payment of proper taxes is all sound and fury that will eventually die down.

"Apart from the exception created by the lawyers’ movement, the common man has come out on the streets only when blasphemy is alleged, or when some religious or anti- West issue gains prominence," observes Hoodbhoy. "The absence of a progressive national movement for economic and social justice means that tax thieves, feudals, and other enemies of Pakistan’s people will get away this time as well."


http://southasia.oneworld.net/todaysheadlines/pakistan-mass-resentment-over-flood-tax-proposal

 

[President Camacho]

Everyone's busy justifying their wrong by pointing the wrong of others. But right has to start somewhere, right?