Sunday, May 20, 2012

Imran Khan's Tax Theft

The so called Champion of Cleanliness, Imran Khan shook everyone by declaring that he did not file any Tax Returns until the Current Millennium, and then too not accurately.

One wonders, if this is not Tax Theft, then what is?

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Although Pakistan Tehreek-e-Insaf Chairman Imran Khan alleges every second person for Tax Theft, Imran Khan himself, in his sixty (60) years of life, has been committing Tax Theft, and has never payed or field correct Tax Returns ever.

When during an interview with Saleem Safi in Jirga Television Show, Imran Khan was asked to respond to the Charge that though he started his Professional Career in the 1970s, he had not paid his Taxes or filed Tax Returns. Imran Khan responded rather amazingly, "The first thing is I was not in Government. Two, my only income was from PCB and from County Cricket, and Tax was withheld by both at the time of payment".

However, Imran didn't realized that things are a bit more serious than he thinks. To keep it simple, he shall consider the Income Tax Ordinance 1979 (Which was operative until 2001, i.e. the greater part of Imran’s Career as a Cricketer and beyond) and the Wealth Tax Act 1963 (Which was only repealed in 2002).

Income Tax Ordinance 1979:

The Ordinance required every person in Pakistan to pay Taxes on his Worldwide Income. This means that if Imran Khan was resident in Pakistan during any of the years from 1979 to 2001 (The likelihood of course being that he was resident for Tax purposes throughout this period), he was obligated to pay Tax not just on Income arising in Pakistan (e.g. Payments received from PCB or its predecessor BCCP) but also Income earned outside Pakistan (e.g. on account of County Cricket). Under the Avoidance of Double Taxation Treaty between Pakistan and United Kingdom, he would have been given credit for Tax paid in the United Kingdom, but subject to that even Income earned in the United Kingdom needed to be disclosed in Pakistan and Tax paid on it. It was not exempt.

Regarding the point that PCB (or its predecessor BCCP) used to withhold Tax on payments made to Imran, one is not sure whether this was so, but even if Tax was withheld, this was not final discharge of Tax Liability. The Ordinance in fact created different scales of Tax Liability. One needed to aggregate all the income from various sources, and then depending upon the scale one fell in, to pay Additional Tax over and above what may have been deducted at source.

Imran Khan was required to aggregate his income from PCB  or its predecessor BCCP, Domestic Cricket, County Cricket, Sponsorship, Advertisements (Remember Lipton, Pepsi, Wills etc.), Television Commentary Fee (of course he did lots of commentary after 1992), Interest Income from Bank Accounts (unless of course he kept all his money in cash), the odd Plot he got (which too would be considered income), any Man of the Match or Man of the Series Awards from Sponsors, income from Commercial Properties (like Pace Shopping Mall, M M Alam Road, Gulberg, Lahore), income from Agricultural Enterprises (as he owns vast Agricultural Land in Mian Chunnu) and any other sources to determine his Final Tax Liability.

Besides, even if there was an odd year during which he may not have been resident in Pakistan for Tax purposes, he was still required to pay Tax in respect of income that "Accrues or arises" in Pakistan, after aggregating all such income. This alone would have been quite a handful, as listed above.

There was separately then the obligation to "File Tax Returns". This applied even to non-residents who had a source of income in Pakistan. Indeed "Every Person" whose total income exceeded the maximum amount not chargeable to Tax, was required to do so. It cannot truly be Imran’s case that his total income fell below the Taxable Limit – throughout the relevant period at least. In any case, after 1997, even a person who may have fallen below the Taxable Limit but undertook Foreign Travel was required to file a Tax Return.

One can therefore safely conclude that in the period between 1971 and 2001, Imran was liable to pay Tax in Pakistan on income accruing in Pakistan and Outside, and any Tax that may have been withheld at source did not mean that additional Tax was not payable. He was also obligated to file Tax Returns. The question of course is whether he did.

Unfortunately, the answer is no.

Wealth Tax Act 1963:

Under this Act any resident of Pakistan was required to disclose and to pay Tax on the prescribed rate regarding all Assets, including Assets "Located outside Pakistan". Imran has admitted that he owned a Flat in London since 1982. Imran was required to disclose this, and all his other Assets, in Wealth Tax Returns, and to pay Wealth Tax at the prescribed rates. Did he?

Unfortunately, the answer is no.

Indeed failure to file the requisite Tax Return alone is "Punishable with imprisonment for a term which may extend to one year, or with fine, or with both". Imran Khan of course has announced that when he is the Prime Minister, anyone guilty of having violated the Law (be it his mentor General Perviaz Musharraf) would be punished strictly in accordance with Law. One does therefore expect him to order Revenue Authorities to go after all Tax Cheats – no matter who they may be.

However, ethically Imran Khan shall pay all his Outstanding Tax Returns before calling others as Tax Thieves.

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