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Wednesday, February 1, 2023
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Taxation crisis

There is a mismatch between income details and tax returns filed by parliamentarians. There was a 28 percent decline in the taxes paid by the lawmakers and one in 10 legislators did not even file the tax returns in 2019. Reportedly, 392 members of the National Assembly and the Senate declared a cumulative income of Rs11 billion in 2019 but they paid a mere Rs576 million in taxes. The figures paint a dismal picture of income tax returns’ filing by elected representatives. If a majority of these legislators, who also because of their public office, have to be held to a higher standard of accountability, are unconscious enough to not even file their returns, then the moral ground on which they legislate on taxes becomes extremely tenuous.

However, the problem is far more pervasive than just the reluctance of legislators to file tax returns. Far less than viewing the payment of tax as an obligation and a duty towards the state, people in Pakistan see it as state-sanctioned racketeering from which they must protect their wealth. The problem is further compounded by the popular perception of corrupt government officials filling their own coffers with the people’s tax money. While it is true that corruption is a serious problem, which has ubiquitous presence in all tiers of society, nevertheless, the solution is not to evade taxes. Pakistan’s abysmal tax collection system only makes inequality worse as then the government has to increase indirect taxes, which disproportionally burdens the poor. Moreover, the loss of revenue resulting from the government’s failure to collect taxes from the wealthy then makes it necessary to turn to international lending institutions such as the International Monetary Fund and the World Bank. In addition to locking the economy into a perpetual state of debt, how the prescriptive measures of these organisations, which are a part and parcel of the funds, have failed to achieve the desired results is fairly self-evident. All of this is a reinforcing nexus, at the heart of which is the failure of the government to put in place an effective taxation system.

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