TAXING THE UNTAXED
ALL SORT OF INCOME MUST BE TAXED.
SHABBIR H. KAZMI
July 4 - 10, 2011
Lately, a consensus seems to be developing in the country that all sorts of income must be taxed irrespective of the source. The two most talked about issue are taxing income from agriculture and capital gains in the equities markets. Analysts are of the view that little is being said about some of the groups that are making tons of money. These include private educational institutes, hospitals, doctors, engineers, boutiques, beauty parlors marriage halls and big retail stores. One of the allegations is that full disclosures are not made or efforts are made to seek exemptions because of rendering social service. The time has come to first document all such tax evaders and collect tax from them.
Private sector educational institutions and hospitals have acquired plots at concessional rates from the government on the plea that they render services, which should be otherwise provided by the government. Since they are in the noble business of educating the future generation or healing the ailing more and more facilities be provided by the government and income should not be taxed. However, analysts are of the opinion that most of these institutions are nothing less than ėmoney making ventures'.
One of the hallmarks of educational institutions is the second face 'marriage halls'. Many of these institutions have acquired 'amenity' plots because they are sharing government's burden. To begin with, these institutions have been sponsored by 'hardcore' businesspersons who charge fabulous fees for imparting education. Most of these have constructed elegant 'real estates' having air-conditioned classrooms and mostly cater to the needs of 'elites of the society'. These institutions help the sponsors in minting tons of money. These are not too many. The second and third tier institutions fleece the parents, exploit the teaching staff and little is being done to groom the future generation.
Posh private hospitals are also ruthless to some extent because they have created 'five star' facilities - have air-conditioned rooms but little is being done to improve the quality of service. These hospitals have 'big names' on the list of consultants but amateurs mostly look after the patients. At the best, these consultants visit the patients once a day and usually Sunday is classified off day. Many of these hospitals either charge medicines at inflated rates or have 'outsourced' the facility. Worst hot is the paramedical staff, as it has to perform 12 hours duty at an average and salaries paid are also low. Senior doctors/consultants do a roaring business. Many of them work at government hospitals, where they spend only a few hours but work nearly 12 hours a day for the lust of money by spending a few hours, on rotation basis.
One may not have the objection on long working hours but two issues are contentious, appointments are fixed with the waiting time ranging from few days to over a month. If a patient is in serious condition, he could die before being checked by a doctor. These consultants often charge colossal fees, give no official receipts of payments, and are the clients of those working for the internal revenue department. They could be termed one of the major tax evaders because they do not disclose the income.
According to some insiders, some of the hospitals and clinics are being run and managed by 'entrepreneurs' who have ample funds at their disposal and construct a real estate and then consultants are given space on sharing basis or on rent. The beauty of this arrangement is that all the facilities are provided by the owners, which include uninterrupted supply of electricity, cozy rooms, and even the staff to confirm appointments. Another interesting aspect is that these doctors also get commission from the nearby pharmacy shops and laboratories.
Construction companies are also alleged for improper disclosure. For them creating a fake subcontractor and then overloading of expenses is very easy. What they usually have are shuttering, plumbing, electrical contractors and carpenters. Since they run huge advertising campaigns they also get kickbacks from these agencies. Since most of the construction companies are not incorporated with the securities and exchange commission of Pakistan, they also do not submit proper income statements and balance sheets.
Of late, it has been also observed that big names have appeared in the food catering businesses. Monthly rent paid by these outlets runs into thousands of rupees and air-conditioning and their electricity bills are astonishing. Catering staff is usually hired on 'commission' basis and suppliers are asked to accept deferred payments.
These are only a few glimpses of the tax evaders of the most obvious groups. To this, the group of jewelers can also be added. Owners have houses in most posh localities; have cars and cell phones with fuel and phone bills running in thousands of rupees. They partly declare what they earn as service charges on jewellery making but hardly disclose the income made from sale/purchase of gold and precious stones.
Some people often wonder why the tax collectors are blamed from 'rampant corruption'. They can be divided into two groups: first that keeps eyes closed in lieu of money paid by the owners/business entities and second that teaches the business community ways to minimize the tax liability. It is full-fledged game and since the tax collecting regime is the biggest beneficiary, the business goes on as usual. Individuals are thriving and the country is sinking under the debt burden.