Who Owns Pakistan - Yimg

Gross Anomalies in the Taxation System Breeding
Corruption
We have stated earlier that the proliferation of taxes and tax collecting agencies
itself is a fertile ground for corruption but the avenues of corruption grow when
each of these taxes is full of exemtions and anomalies. A brief description of a
few anomalies in some major taxes will help understand the regressive nature of
the taxation system and in-built provision for corruption.
Income Tax
For years intellectuals and businessmen have been compaigning for an income
tax on agriculture, unmindful of the fact that " income from agriculture", is only
first of 180 total exemptions from payment of income tax provided in the second
schedule of Income Tax Ordinance, 1984, as amended in 1996.
The list of exemptions from total income tax include Capital gain, amount
received on sale of dollar bearers certificates, income from private foreign
currency accounts and host of other incomes. "Export of certain goods" is partly
exempted from income tax but the goods enjoying the exemption and the degree
of exemption is not elaborated. However, according to CBR yearbook, 1994,
earnings from 258 export items are liable to exemption in payment of income tax,
at varying rates.
Besides tax holidays in the industrial estates and 180 total exemptions, the
taxation system has in-built loopholes that help the rich and influential in avoiding
payment of income tax. Thus, in 1992 boom year for textile, only 36 textile units
paid income tax amounting to Rs 141 million and both Benazir and Nawaz Sharif
accused All Pakistan Textile Mills Association (APTMA) of evading taxes.
A frank and candid response to why Pakistan's industrial barons are not paying
income tax proportionate to their income was provided by industrialist Farooq
Somar in an interview with monthly Newline, Karahi issue of October 1995. He
was asked to comment on the fact that the entire textile industry pays less
income tax than employees of one multinational.
" Under the tax laws prevalent in the country today, there is a thing
known as "accelerated depreciation allowance". This allows one,
for income tax purpose, to show a loss by claiming accelerated
depreciation on new machinery. This is not evasion of income tax
but avoidance of tax through legal means" was his reply.
120