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Study says majority of high earners do not pay tax

ISLAMABAD: Majority of Pakistanis who never paid a single penny as taxes throughout their life are highly qualified, live in the most expensive locations like the DHAs in Karachi and Lahore, have their accounts in foreign banks and make frequent travelling abroad, disclosed a study.

The research carried out by the National Database and Registration Authority (Nadra) has unfolded another most alarming fact that the segment of population under question does not possess the National Tax Numbers (NTNs) in the first place. And individuals falling in this category are more than half-a-million, according to a conservative estimate.

If each one of them is taxed at the rate of Rs75,000 annually, that is bare minimum as compared to their income, it will fetch revenue to the tune of Rs40 billion, a target that the government instead wants to achieve through the imposition of Reformed General Sales Tax (RGST).

This non-tax paying elitekeeps their wealth in foreign accounts. Of them, more than 33 per cent individuals have two or more accounts in foreign banks like American Express Bank, Bank of Tokyo, HSBC, Barclays, Standard Chartered, RBS, Citi Bank and others. There are a sizeable number of females also marked in this category and 75 per cent of them have accounts in foreign banks.

The study further notes that majority of the non-taxpayers in this category are the young entrepreneurs of rich background as being the scions of wealthy parents, falling in the age bracket of 25 to 45 years. Pakistan’s adult population is 86 million and only 2.5 million are in the tax net with its major portion, 1.8 million, constituted by the salaried class. Pakistan’s tax-to-GDP ratio is 9.6 per cent, the lowest in the world where there are only 1.2 million active taxpayers and the remaining either have their tax deducted from salaries or evade taxes.

Among the 10 largest cities, Karachi hosts the highest number of wealthy people who are not registered with the tax authorities, thus, they never paid tax, followed in order by Lahore, Rawalpindi, Islamabad, Faisalabad, Peshawar, Hyderabad, Multan, Quetta and Gujranwala.

Nadra Chairman Ali Arshad Hakeem was not available for comments. However, well placed Nadra officials verified the contents of this study that, they said, was aimed at helping the Federal Board of Revenue to bring more people into the tax net.

Previously, Nadra had spotted the tax evaders providing a list of E-7 residents whose majority does not pay taxes. These non-taxpayers were found out through Nadra’s data mines by examining the areas such folks reside, their accounts in foreign banks, nature of business/profession, travelling patterns and relations abroad. Through this exercise, Nadra found out 565,953 such individuals who never paid income tax. Of them, 79 per cent were male and 21 per cent female.

The study found out that Karachi has the largest number of such non-taxpayers (154,479) living in DHA, Clifton and at other posh locations. Lahore followed by 77,568 such non-taxpayers residing in DHA and other expensive places. Rawalpindi has been ranked third with 33,381 such individuals, followed by Islamabad (18,233), Faisalabad (16,118), Peshawar (13,698), Hyderabad (13,622), Multan (12,696), Quetta (8,613), and Gujranwala (8,610).

Majority of these non-taxpayers are graduates (244,396), followed by post-graduates (192,953) and then below matriculation (37,047). Regarding the age brackets, the majority of non-tax paying individuals range between 35-45 years (220,932) followed by 25-35 years (185,749), 45-55 years (91,201), 55-65 years (44,641) and 18-25 (23,430).

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