Tax Returns: Exhibit A of Elite Capture
Data released by the FBR shows how elites across party lines have created a system that enriches them.
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This newsletter is different than usual ones, primarily because I am in a mood today. And the mood is largely driven by what has become a norm in Pakistani politics: rich parliamentarians proudly showcasing that they pay a fraction of income taxes that they should.
But before jumping into that, here’s an important tax concept that we all must understand: tax filing does not equal tax payment.
The majority of tax revenues raised by the Government of Pakistan is through indirect taxes. Which means that every Pakistani pays taxes.
If you have a phone, you pay taxes.
If you consume petrol, you pay taxes.
If you buy biscuits from the corner shop, you pay taxes.
So next time someone says Pakistanis do not pay taxes, please set the record straight.
Which brings me to the issue of elites paying taxes. I am no tax expert and understanding even the simplest of tax codes is quite a difficult task. Perhaps I will at some point in the future invite a tax expert to discuss Pakistan’s tax laws and dive deeper into the issues.
But, I do know that rich men like Shah Mahmood Qureshi should not get away with paying Rs. 183,900 in income taxes. This amount, by the way, is a whole lot less than what many of my friends pay. And no, these friends are not even close to being as rich as the man from Multan.
But what about agricultural income?
This was one of the most common points raised on Twitter when I pointed out SMQ’s tax returns - note that he isn’t the only one taking advantage of this and you will find rich men across parties paying a pittance in income taxes.
I know the issue with taxation of agricultural income and this is precisely the point.
Here’s where Pakistan’s economy stands today:
Growing indebtedness, both in terms of external and domestic debt
A fiscal deficit hovering close to 10 percent of GDP
Lack of fiscal space to fund development, education, and healthcare spending
And in such a situation, where the state is pretty much bankrupt and solely reliant on the IMF, foreign allies like China and Saudi Arabia, and the international bond market to keep it afloat, we have rich parliamentarians making a mockery of the situation by paying Rs. 183,900 in taxes!
Not only that, they are proudly DECLARING this amount!
This isn’t just about politicians either
The entire taxation system is broken. Rather than tax the elite, Pakistan continues to burden low- and middle-income citizens with more and more taxes. And the state continues to do that as its failed policies push up inflation - including food inflation - that eats into the purchasing power and savings capacity of the vast majority of the country’s population.
People often say that Pakistan needs reforms, especially fiscal and tax reforms.
But ask yourself this: do you expect parliamentarians who are beneficiaries of the current tax code to actually change the regulations and make themselves and their friends pay more taxes?
Absolutely not!
So next time you decide to support a politician, hold their feet to the fire about how much taxes they pay and what, if any, work they have done to reform Pakistan’s tax code.
Because until and unless more Pakistanis do not confront the elite about this rigged system that they have created and perpetuated, you and your families will continue to struggle for a better future. Inflation will erode your purchasing power, your children and grandchildren will become even more indebted, and you will be made to pay more taxes than men like Shah Mahmood Qureshi.