Tax directory will backfire

Pakistan finally has something in common with the Scandinavian countries. After Finland, Norway and Sweden, Pakistan is said to have become only the fourth country in the world to publish its taxpayers’ directory. Not a bad company to keep – eh?
But is it not ironic to be in company of states having arguably the world’s best social security system and the highest tax-to-GDP ratios ranging over 40 percent?
Exhibiting a list of 850,000 tax filers, including individuals, in a nearly 17,000-page document is probably an attempt to shame the non-tax filers. But tax return filers are a tiny fraction of the adult population. One assumes that by making the taxpayers’ names public, the government attempted to embarrass tax evaders.
Will this plot ever work? Well, global experiences suggest otherwise as only countries with the highest level of documentation have shared this arguably private information.
Sharing the list of parliamentarians makes sense as they are public representatives having assumed the office by choice and should be accountable on all fronts. For more details, see BR Research’s column “Parliamentarian’s tax diary” published on April 10, 2014.
There is another prism to see the consequence of sharing taxpayers’ information. With bleak security situation and numerous incidence of kidnapping for ransom, now all a kidnapping gang has to do is to search for large taxpayers in this public tax directory and then exploit or target them. Well it may not be that simple – but you got the point – right?
Then, in our culture, people usually don’t share their respective income levels, even with friends and families for personal reasons. Now any teaser has to type your name and find the tax you pay and multiply it by five (highest individual tax rate is 20%) to get your annual income. Doesn’t that lead to invasion of privacy?
There is a good chance that this tax directory may become an incentive for non-filing among the marginal taxpayers. Government should not have published such details without due deliberation and public debate on it. How can the FBR lure non-payers into filing returns when there are numerous examples of large individuals and corporations unashamedly evading taxes and not feeling guilty about it in public?
For instance, there is a famous company in confectionery business that is said to have sales approaching one-third of what the foods giant Nestle earns in Pakistan. That company is paying virtually nothing in taxes while its philanthropy activities are amongst the highest. Similarly, a real estate tycoon has been publically saying of contributing over billion dollars for provision of low-cost housing and other avenues to help the under-privileged. But he is nowhere to be found in the list of taxpayers.
There is a general consensus amongst many businesspersons and high net-worth individuals that if one is paying Zakat then there is no need to pay government taxes. How can the government shame those with such firm beliefs by just releasing a tax directory?
There is another set of individuals amongst policymakers, judiciary and senior executives in armed forces who are not paying adequate share of taxes and the law facilitates them to do so – see BR research column “It’s income tax, not SROs”, published on March 5, 2014.
Another irony is that on the FBR website, the Prime Minister’s tax incentive scheme’s (which some observers term a tax amnesty scheme) banner is placed right below the taxpayers’ directory. Talk about ironies!