The latest tax directory for Parliamentarians released by Federal Board of Revenue (FBR) has sparked a controversy. Prime Minister Imran Khan paid a total of 9.85 million rupees in income tax for the tax year 2019. His income tax surged by a whopping 3389% during his first year in office, rising from 282,449 rupees, paid in 2018.
Analysis of FBR’s tax returns from 2018 reveals that that the PM was ranked 141st in the list of income tax paid by MNAs and Senators for tax year 2018. Whereas, he is ranked 9th in the same list of taxpayers for 2019.
This has left tax analysts and current affairs analysts perplexed. In a comment to BBC’s Tanveer Malik, Information Minister Fawad Chaudry has claimed that the massive rise in PM’s income tax resulted from a sale of property. A closer look at Pakistan’s tax laws raises important questions.
Taxable income in Pakistan is calculated under five different types of income, as follows:
- Salary.
- Property.
- Business.
- Capital gains.
- Income from other sources, which includes income from dividends, royalties etc.
This means income tax is sum total of taxes paid on salary, property, business, capital gains and income from other sources.
Pakistan’s finance act 2018-2019, which was applicable for the tax year to 2019, clearly states that no capital gains tax will be levied on property or piece of land sold after being held for more than 3 years. To put it in context, for Imran Khan to have incurred capital gains tax, he must have sold a property which he bought in tax year 2016 or afterwards.
This raises two pertinent questions:
- A) What property/piece of land did Imran Khan acquire between 2016 and 2019
B) which was then sold in tax year 2019 and C) resulted in such a high capital gains tax that led to a staggering rise in Prime Minister’s income tax return? - If Fawad Chaudry’s statement about a property sold by Imran Khan is incorrect, what has resulted in higher income tax returns for the Prime Minister? In other words, if the higher income tax did not result from capital gains tax, then what led to increase?
Furthermore, a high level source from FBR corroborated with the above analysis. The sourced added that the PM has declared no such property or its sale. The source went on to add that all properties held for more than 3 years were exempt for capital gains tax per finance act 2018-2019.
An Election Commission of Pakistan (ECP) report on the PM’s immovable property and assets in 2020 showed that the total value of Prime Minister Imran Khan’s assets stood at Rs80.6 million. Per the report in 2020, the Prime Minister has only added to his immovable asset (property + piece of land) portfolio and showed no such sale of land or property.
The Pakistan Tehreek-e-Insaf (PTI) brands itself as a champion of accountability. Imran Khan labels himself as Pakistan’s most transparent leader. Given this, it is important for the Prime Minister to come clean on the reason for his high tax return in the first year of office.
The analyst has menrioned only 5 heads of income under which tax is levied in Pakistan. But a major chunk of income tax is paid to the government in the shape of Withholding taxes. It is possible that PM may have purchased a property and got tax deducted at source u/s 236 K or on sale u/s 236C. Though capital gain is exempt on inherited property but withholding tad deducted on sale can be claimed ss refund.