The website of the Federal Bureau of Revenue in Pakistan released on Saturday the tax payments made by Members of Parliament.
On February 15, Pakistan became one of only four countries in the world that make tax records public. The other three are Norway, Finland and Sweden. A year ago, no one would have thought this was possible. Pakistan, after all, is a cesspool of corruption and a paragon of opacity. But check the website of the Federal Bureau of Revenue and you’ll find prominently displayed there a link to the Parliamentarians’ Tax Directory. Click on the link and you’ll get a PDF that lists how much income tax each and every member of Parliament paid in 2013. On March 31, a similar listing will be made publicly available for the tax payments of all citizens.
How in the world could this happen in Pakistan?
A large part of the credit should go to the intrepid Umar Cheema, founder of the Center for Investigative Reporting in Pakistan (CIRP), which in the past year published two well-documented reports that showed tax evasion on an epic scale. The success of this project inspired me to take up this blog again after several months of inactivity. It’s not always that investigative reporting makes such clear and dramatic impact. So it’s a good time to revisit a question that’s often asked: What kind of reporting makes an impact? What stars must align for reforms to follow in the wake of an exposé?
In the past two weeks, I have been lecturing my students about the importance of crafting the investigative narrative and engaging readers. Good narratives make impact, I said. Yet the two reports that the CIRP has published are densely written, numbers-packed pamphlets, each about 70 pages long. There are no sexy graphics, no stunning multimedia, no gripping and polished stories. The prose is dry – they could well have been written by the World Bank. Moreover, the reports confirmed what people in many developing countries already know: The rich don’t pay taxes. And yet they captured the popular imagination and forced the government to do the unthinkable. Why?
Pakistan is a basket case in terms of tax collection. It has one of the worst tax-to-GDP ratios in the world – just nine percent, worse even than Afghanistan’s 11 percent. Three years ago, the finance minister told parliament that Pakistan’s ratio was second to the bottom among 154 countries. Yet nothing was done.
In December 2012, the newly formed CIRP released its first report, which showed that two-thirds of Pakistani MPs did not pay taxes. Neither, it said, did the high-living, polo-playing, playboy President Asif Ali Zardari and more than half his Cabinet. The findings got wide play in Pakistan’s free-wheeling press. Perhaps it was the specificity of the details, the fact that it named and shamed and put precise numbers that showed the extent of the tax evasion – the report caught fire and stoked the public anger. (I wrote how that project was researched in an earlier post.)
The National Assembly reacted by proposing a controversial tax amnesty bill that would allow tax dodgers to legitimize their assets by declaring them and paying just 100 rupees. Some MPs also proposed a new law that would impose more restraints on the media. These actions only contributed to the public’s ire. Abroad, the exposé raised eyebrows in the donor community. Pakistan gets billion of dollars in foreign aid. But because of the low tax base, it invests little in services for its citizens, relying instead on donors to fill the gap.
In just a short span of time, what had previously been taken for granted – that the elite could get away with not paying taxes – was now seen as something that needed to be changed. The timing couldn’t have been better. Elections were scheduled for May 2013 and it was to be the first civilian transfer of power after a democratically elected government took office. The opposition rode on the tax issue because it was popular among voters. At the same time, donors wanted taxes to be part of the election discourse.
As Cheema recounted in an email, “When the UK Parliamentary Committee on International Development held a hearing on our 2012 report, the chair asked the Secretary for International Development to take up the matter with Pakistani authorities. The Secretary said she had conveyed concerns and was looking forward to see the manifesto of political parties as election was approaching.”
In April 2013, the Committee questioned the UK government’s decision to nearly double assistance to Pakistan, making it the top recipient of UK foreign aid. It said any aid increase should be contingent upon the Pakistani’s government’s success in collecting more taxes. In its report, the Committee pointedly said, “We cannot expect people in the UK to pay taxes to improve education and health in Pakistan if the Pakistani elite does not pay meaningful amounts of income tax.”
The International Monetary Fund also weighed in, saying that the government had to crack down on tax evasion if it wanted approval of a $6.7-billion IMF package. The message was clear: Anyone who wanted to take the reins of power in Pakistan needed to either address the tax issue or make do with drastically reduced levels of aid.
In its election manifesto, the Pakistan Muslim League led by candidate and former prime minister Nawaz Sharif promised to make tax records public. “Manifesto commitments are generally for election consumption,” said Cheema. Sharif won and his government seemed to have conveniently forgotten its campaign promise.
Then in December last year, the CIRP published a second report, this time saying that almost 50 percent of the lawmakers who won in the last election had paid no income taxes. The report revived the tax debate, prompting the Pakistan Muslim League, now the ruling party, to instruct its members to file tax returns. But, said Cheema, it also prompted a parliamentary committee to summon the chair of the Federal Board of Revenue to ask him to declare publicly that “lawmakers were regular taxpayers and tax data is classified.” The chair obliged.
“I issued a rejoinder the next day,” recounted Cheema, “and it was widely read and discussed.” The same day, the finance minister directed the Federal Bureau of Revenue to start preparing the tax directory. He also said that every lawmaker must have a National Tax Number (NTN) by January 31. An NTN is needed in order to file taxes – the CIRP report had said that one in 10 legislators didn’t even have an NTN.
Cheema said the minister rang him to say, “I wanted to let you know that we stand shoulder to shoulder with you in this fight. Directories have been ordered. And they will be published every year from now on. You know when I meet officials from US and UK, they say several Pakistani lawmakers don’t have National Tax Numbers. They came to know through your reports.”
On Saturday, reporters examined the tax directory that had just been posted on the FBR site. They found there the payments made by 1,172 MPs, including the new prime minister. They also found that 102 legislators had not filed their tax returns. That’s less than 10 percent, compared to nearly 50 percent before CIRP’s report was published.
So what was this investigation’s secret sauce? Good, detailed, document-backed reporting. Excellent timing. Saturation coverage by other media. A public that was tired of its irresponsible elite. Donor pressure. A government that realized it couldn’t survive if it didn’t change.
Investigative reporting can be a catalyst. By presenting previously unknown facts, it stirs up public debate and prompts others to take action. It makes change possible. That Umar Cheema has shown.
Sheila Coronel is director of the Stabile Center for Investigative Journalism at Columbia University, and is the former executive director of the Philippine Center for Investigative Journalism. This is reprinted from her blog, Watchdog Watcher.