The Election Commission of Pakistan has released sworn affidavits from Prime Minister Yousuf Raza Gilani and 25 of his ministers, including Federal Finance Minister Hafeez Sheikh and Hina Rabbani Khar, the Minister of State for Economic Affairs, that they have not paid any income tax during the last three years.
Prior to judging these 25 cabinet members harshly it is critical to understand that the country's taxation system does not impose a tax on the income of rich agricultural landlords, no doubt a socio-income category in which both Prime Minister Gilani and Ms Khar belong; or tax on income earned abroad, a category to which Hafeez Sheikh belonged for the past three years.
In light of the fact that the Prime Minister as well as other federal ministers, including the Finance Minister, have been repeatedly advised by the international community as well as the multilaterals that the onus of generating resources for the flood affected people must not only fall on their taxpayers but also on Pakistan's rich and influential, the 25 affidavits take on some rather sinister overtones. It maybe recalled that Hillary Clinton, while on a visit to Pakistan, had been appalled at the small number of income tax payers in this country as a percentage of our total population.
The typical defence of our rich landlords in resisting the imposition of a farm income tax has been twofold. First, that the farm community does pay indirect taxes on their inputs. However what must be emphasised is that an input tax is essentially regarded as a cost of production by producers, be they industrialists or farmers or the service sector that is typically adjusted as a cost in the final output and thereby automatically adjusted against the income of the farmer. It is the income above a certain level after all indirect taxes are paid that, like all other sectors including the industrial sector, must be taxed. Pakistan's income tax is considered an inequitable tax as the bulk of its collections are from the largely middle class salaried people.
Secondly, the rich landlords also point out, the major defence provided by Hina Rabbani Khar repeatedly, that farm tax is constitutionally a provincial subject and hence the federal government is not empowered to impose the tax. As is evident provincial governments have shown no gumption, and little initiative, to impose a tax on the income of rich landlords commensurate with their huge incomes, no doubt in deference to the national and provincial parliamentarians heavily represented by the rich landlords.
Such is the level of the democratically elected parliament's commitment to turn the economy around and render the tax system more equitable that the constitutional committee on amendment of the constitution did not focus on the need to impose a farm income tax at all. The blame for that rests with all those parties that were members of the committee. Be that as it may, ideally one would hope that the federal government would spearhead a movement to impose such a tax in parliament and failing that to impose a tax on the income of the rich landlords above a certain level as a one off in support of the flood victims.
With respect to Hafeez Sheikh's non-payment of tax he maybe advised to consider the US model where expatriates are not exempt from the payment of income tax. In other words if anyone keeps the Pakistani nationality, and our leadership in exile must also be included in this, then any income, whether it be from lectures or whatever, must be compelled to pay income tax to this country. In addition it is also relevant to note that Hina Rabbani Khar is believed to be a joint owner of an expensive restaurant located in Race Course Park, Lahore, and one wonders if her income from that restaurant was high enough to be taxable.