It was not in the province of this book to catalogue the taxes being collected by the federal, provincial and local governments but I have identified 70 major taxes to which consumers and producers are subjected. In addition there are host of specific taxes like a Research and Development Levy, Drug Manufacturing Licence Fee and Drug Registration Fee. It can be said safely that there are at least 100 taxes in vogue in Pakistan.
It is not the proliferation of taxes that is mind-boggling. It is the exemptions to these taxes for the privileged, their duplication and triplication for the common man, the method of their collection and making refunds, utilization of specific-purpose taxes that is mind-boggling. There is an education cess levied by the federal govt, another education cess is collected by provincial govts. The Central Excise Duty (CED) is being collected on the telephone bills by Pakistan Telecommunication Corporation but Baluchistan govt introduced a duty on telephone calls in the 1996-97 budget. Federal govt has levied a Tobacco cess but in the 1997-98 budget the provincial govt of NWFP levied a Rs one per Kilo Tobacco Cess. Civil Aviation Authority collects an airport tax. There is a Workers Participation Fund and another Workers Welfare Fund.
There are federal taxes like Ushr being collected by the provincial govts, provincial taxes like motor vehicle tax being collected by the federal govt. Local taxes like the property tax is being collected by the provincial govt and reimbursed to municipal corporation and committees.
An appeal by the leading hotels and restaurants of Lahore in the national newspapers after the 1997-98 budget exemplifies the multiplication of taxes in Pakistan.
"In the recent Punjab provincial budget, an additional tax of 10% has been levied on the posh restaurants and international hotels of the province. This is in addition to 12.5% Central Excise Duty and 5% provincial tax levied on July 1, 1996. Cumulatively, these taxes add up to about 30% which, by any national and international standards is extremely high", the appeal said.The Stamp Act provides for stamp duty on 55 different categories of documents at a prescribed rate. Some of the documents specified are affidavits, agreements, allotment orders, attestations, bank guarentees, custom bonds, debentures, import documents, insurance policy, lease, partnership, power of attorney, security bonds, share transfer certificates, cheques, bank drafts and pay orders.
It is this proliferation of taxes and tax collectors which create an ideal situation for pilferage's. This proliferation and pilferage of taxes has pitched the people and govt in Pakistan, at two opposite horns of an economic dilemma. While the people are groaning under the heavy burden of taxation, the govt leaders bemoan that the people do not pay taxes. They are both right because the taxes paid by the people do not reach the govt coffers. They end up lining the pockets of the contractors and collectors.
Following are major taxes levied by the federal and provincial governments.
Corporate Asset Tax
Corporate Income Tax (A)
Income Tax on imports
Import Licence Fee
Import Registration Fee
Export Registration Fee
Central Excise Duty
Sales Tax on Manufactured goods
Capital Value Tax
Export development Surcharge
Development Surcharge on Petroleum
Gas Development Surcharge
General Sales Tax
Federal Education Cess
Workers Participation Fund
Workers Welfare Fund
Oilseeds Development Cess on Companies
Development Surcharge on Electricity
Textile Technology Cess
Cargo throughout @ 2% charges freight charges and an additional three 3% for immediate clearance at Quaid-e-Azam Airport, according to an advertisement in daily, Business Recorder, February 12, 1998.
Capital Gain Tax
The Presidential Orders for the dismissals of the federal govts in 1990, 1993 and 1996 had refered to corruption in various govt bodies and " authorities" as a ground for dismassal. The word " authorities" was used to refer to corruption in the development authorities like Capital Development Authority, Lahore Development Authority and Karachi Development Authority.
Pakistan has at least 16 development authorities and each one requires volumes like the exploits of Casanova to touch upon their corruption and rot. The 7-hour ordeal that Prime Minister Nawaz Sharif underwent on March 11, 1997 in the Faisalabad Development Authority, viewed by millions of people over Pakistan Television gave only a birds-eye view of the tip of iceberg of corruption in these authorities.
In addition to the 16 development authorities, Pakistan has two metropolitan corporations, 12 big municipal corporations, 24 cantonment boards, 6 Water and Sewerage Authorities and more than a hundred municipal committees. All these local govt units have their own sources of income and budgets amounting to Rs 25 billion per annum nearly.
The tales of corruption that the govt and opposition has been telling the nation for last two decades including the ripping-off the biggest development authorities like CDA,LDA, KDA and PDA. However , the plunder of smaller development authorities like the Rawalpindi Development Authority, Gujranwala Development Authority and Faisalabad Development Authority has largely remained untold.
At a press conference in Islamabad, on the eve of February 3, 1997 elections, Imran Khan, chief of Tehrik-e-Insaf released a list of 2,631 plots that were alloted by Nawaz Sharif during 1985-90, in violation of his powers and rules. A document distributed at the press conference estimated that " the cost of this large scale robbery by the leader of PML who presents himself as an honest leader to the nation comes to Rs 5 billion"
In 1990 and 1996 when Benazir Bhutto was dismissed, she was charged with allotment of CDA plots to favorites while her chief ministers were accused of similar malpractices in Karachi Development Authority and Peshawar Development Authority. It was alleged that she had caused a loss of Rs 1,310 million to CDA simply by alloting big size plots to educational institutions of her choice.
The foundation of corruption in the local bodies is the system of awarding contracts for revenue collection and other municipal functions to private contractors and over the years, the contractors, colluding officials and politicians have hammered out a mutually beneficial, pool system under which they are ripping off the common men but only a fraction of the amount reaches the govt coffers. The common men and businessmen from all over Pakistan have complained against over charging by octroi contractors who are invariably political heavyweights or their henchmen. It was in response to this hue and cry that Punjab govt put up advertisements in newspapers in the third week of March, 1998 asking the people to ring up two telephone numbers in Lahore if they have complaints of overcharging by octroi contractors.
The contractors and those who award the contracts have a simple way of cheating, both the govt and the common men. The bids are invited on the basis of unrealistic low rates with the result that contract is awarded for a nominal amount. However, once the contract is awarded the contractor is given a free hand to overcharge and the bulk of the amount charged as octroi and other municipal taxes end up lining the pockets of the bureaucrats and contractors.
The daily Business Recorder, Karachi has regularly carried complaints by the business community against overcharging of municipal taxes by the contractors. According to a report in December 9, 1997 issue, the export of Molasses by the sugar mills in up country came to a standstill because the octroi contractors in Sindh were charging several times the due amount. Quoting the exporters of Molasses by sugar mills , the report said " Rawangi Mahsool (Export Tax)" on Molasses was fixed at Rs 15 per truck but the contractors were charging at Rs 75 per ton. In addition the exporters had to pay Rs 25 per ton at Karachi and KMC octroi of Rs 2 per ton. Thus total levies came to Rs 117 per ton which was more than 10% of the value of exports.
On June 25, 1996 when the Supreme Court restored the Local Bodies in Punjab, the first official work, some of the restored chairmen performed on rushing to their offices was cancelling octroi contracts and stop payment on the so-called development projects. They knew that their chairmanship was not worth a penny if the contractors awarded by their predecessors were to stay.
The municipal corporations and cantonment boards have up to 30 sources of income but the major head of income include the following.
Gross Tax anomalies
Table of Contents
Richest Individuals of Pakistan
Robber Barons of Pakistan