PTI, FBR & tax directories — I

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, 2013and ‘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 the 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 the 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 2013 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 the elections of 2013, these tax delinquents managed to contest and succeed at many places.

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.

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 the calendar year as special tax year for accounts made as on December 31, 2017. Returns for tax year 2018 became due after PTI came to 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)—PML-N. 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, the Foreign Assets (Declaration and Repatriation) Act, 2018 and the Voluntary Declaration of Domestic Assets Act, 2018, with the assurance of “complete confidentiality”, not revealing the names of beneficiaries that included even public office holders 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 the 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.)].

(To be continued tomorrow)

(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences)

Copyright Business Recorder, 2021