Pakistan publishes list to embarrass tax cheats into paying up

By Katharine Houreld

ISLAMABAD (Reuters) - Desperate Pakistani tax authorities are publicly shaming defaulters by publishing taxpayers' details in a directory for the first time, officials said on Wednesday.

The cash-strapped authorities find it almost impossible to chase down the large number of defaulters - many of them powerful politicians - through the country's moribund courts.

Only around one in 200 citizens files income tax returns. The state is left begging foreign donors to help fund crumbling public schools and hospitals.

Anger over poor public services fuels the Taliban insurgency and other militant groups destabilizing the nuclear-armed nation.

So far, there's little been political will to improve tax collection, since most legislators and many ministers have been tax evaders too. Reformists hope publication of the directory marks a change of policy.

"We hope this will become the talk of the town," said Shahid Asad, the spokesman of the Federal Board of Revenue. "People will be living these luxurious life styles and others will be saying to them - where is your name on that list?"

Cracking down on tax evasion is a key condition of a $6.7 billion loan from the International Monetary Fund intended to prop up Pakistan's dwindling foreign reserves. The cash is being doled out in increments and could stop if Pakistan fails to institute reforms.

Directory publication signals that Finance Minister Ishaq Dar is serious about tackling the problem, said Umar Cheema of the Center for Investigative Reporting in Pakistan.

"It's a kind of miracle," said Cheema, who triggered a public outcry when his organization published two reports showing that nearly 70 percent of Pakistani lawmakers did not file taxes in 2011 and around half did not file in 2012.

"Information is the first step towards change," he said. "Tax has become part of the mainstream debate and people are getting radicalised about tax evasion by the rich."

The publication of the directory makes Pakistan the fourth country in the world - after Sweden, Finland and Norway - to publish the details of all individual and corporate tax payers. Citizens have until May 15 to dispute the records.

Finance Minister Dar said the directory was a response to criticism by British and American donors who had questioned why they were sending development aid when wealthy Pakistani lawmakers refused to pay up.

"They said, 'while Pakistani parliamentarians do not pay taxes ... why should we spend our taxpayers money?'" he said. "This is a response to that."

The directory contains the details of everyone paying tax in Pakistan and how much each paid. Authorities also have a much bigger database of 2.3 million wealthy tax defaulters that details cars, foreign travel, mansions and bank accounts. That has not been published.

Some reformists doubt that public shaming will be enough to provoke payment in a country where most of the wealthy are tax cheats. They are calling for prosecutions - no one has been jailed for income tax evasion for more than 25 years.

"By publishing this figure, they can't say they have done their job. They should pinpoint tax offenders, start an investigation and prosecute them," said Ikramul Haq, a professor of tax law and Supreme Court lawyer. "Otherwise what is the purpose of publishing this list? It is just wasting time."

Many judges, generals and legislators were not on the 17,000 page list, he said, underscoring the deep-rooted interests that prevent reform.

But Pakistan's problems go beyond just collecting more taxes, said Nadeem Haque, a former deputy head of the country's Planning Commission.

Officials waste huge amounts of public funds on perks, ceremonies and land for themselves, he said. If given more cash, they would probably splurge on more luxuries, he said.

    "We have to build society and institutions. Tax is neither here nor there," he said.

"Without reform this system will remain intact and stifle the poor, who have only two choices: migrate or join some revolution that disrupts this system. The only one available is the Taliban."

(Reporting by Katharine Houreld; Editing by Clarence Fernandez, Larry King)