Monday, July 19, 2010

To libertarians

The tax-free paradise that is Pakistan.

The rules say that anyone who earns more than $3,488 a year must pay income tax, but few do. Akbar Zaidi, a Karachi-based political economist with the Carnegie Endowment, estimates that as many as 10 million Pakistanis should be paying income tax, far more than the 2.5 million who are registered.
Out of more than 170 million Pakistanis, fewer than 2 percent pay income tax, making Pakistan’s revenue from taxes among the lowest in the world, a notch below Sierra Leone’s as a ratio of tax to gross domestic product.

Mr. Zaidi blames the United States and its perpetual bailouts of Pakistan for the minuscule tax revenues from rich and poor alike. “The Americans should say: ‘Enough. Sort it out yourselves. Get your house in order first,’ ” he argued. “But you are cowards. You are afraid to take that chance.”

Much of the tax avoidance, especially by the wealthy, is legal. Under a 1990s law that has become one of the main tools to legalize undocumented — or illegally obtained — money made in Pakistan, authorities here are not allowed to question money transferred from abroad. Businessmen and politicians channel billions of rupees through Dubai back to Pakistan, no questions asked.