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Report slams Pakistani leaders as tax dodgers

The Washington Post

Pakistan President Asif Ali Zardari, presumed to be one of the nation’s richest men, did not file tax returns last year, a new report contends. Neither did Interior Minister Rehman Malik. And nearly 70 percent of the members of Parliament failed to pay taxes, according to what may be the first comprehensive, independent review of major politicians’ tax returns (or lack thereof).

The report, published earlier this month by the Center for Investigative Reporting and the Center for Peace and Development Initiatives, has not only caused consternation among the political elite but also raised further questions about Pakistan’s ability to meet its domestic revenue obligations and cover foreign debts.

Zardari’s spokesman told the media that the president had indeed filed a return — after initially claiming he was exempt.

“One must wonder which statement is true,” said investigative journalist Omar Cheema, the report’s author. “Can they show us the tax return?”

For years, it has been an article of faith that few public figures or rich people pay taxes there.

“If they don’t pay, why should the public pay?” Cheema said. And, indeed, the vast majority of Pakistanis take their cue from the wealthy elite. A mere 2 percent of the estimated 200 million population is registered to pay taxes.

He said it was unseemly to expect the American taxpayers to contribute to the economy in the form of enormous aid packages for the perpetually cash-strapped Pakistani government.

Inflation, currency devaluation and energy shortages continue to drag down Pakistan’s economy.

In July, Moody’s Investors Service lowered Pakistan’s credit rating deeper into junk status, from B3 to Caa1. The New York-based credit rating agency cited varied reasons for the downgrade, including: “a deterioration in Pakistan’s balance of payments over the past year, the looming large repayments to the IMF, the dwindling level of official foreign-exchange reserves, and the institutional weakness stemming from political instability and constrained government finances.”

The country’s massive debt to the International Monetary Fund of $7.5 billion comes due by 2015. As of June 2012 $1.2 billion had been paid.

Pakistan’s new tax czar, Ali Arshad Hakeem, made headlines earlier this month with his plan for sweeping tax reform and an amnesty for tax dodgers, including those nonpayers and those became rich through less-than-legal endeavors. But it remains to be seen whether his zeal translates into actual reform and cold, hard cash.

“Unless there is naming and shaming, nobody will fix the problem,” Cheema said.