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UK MPs Criticise Pakistani Tax Avoidance In Aid Row

by Robert Lee,, London

08 April 2013

A group of UK lawmakers has voiced misgivings about future increases in the amount of aid given to Pakistan, where it says the wealthy elite is not paying "meaningful" levels of income tax.

The House of Commons International Development Committee is calling on the Government to set clear terms under which it may increase or reduce future aid funding. According to Sir Malcolm Bruce, chair of the cross-party group, Pakistan's rich must "demonstrate a clearer commitment to improving conditions and basic opportunities for all their fellow citizens by paying more in tax than they do under present arrangements."

Bruce explained that: "The Committee is concerned that not enough tax is raised in Pakistan to fully finance improvements in the quality of life for poor people." On a more explicitly political note, he added that: "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 Committee believes that the UK should be at the forefront of efforts to encourage Pakistan to implement an effective tax collection regime. In a new report, it urges greater moves toward co-operation with other donor countries with the result that Pakistan would be required to demonstrate progress on tax policy and revenue collection.

Further, it wants the Government to exercise its influence within the International Monetary Fund, with the aim of having the Fund throw its weight behind the call for reform. At a more educational level, the Government is recommended to support a communication plan within Pakistan that will explain the need and benefits of tax policy change and build domestic political momentum for reform.

"As a significant friend of Pakistan, the UK must do all it can to encourage Pakistan to implement effective tax collection as part of wider reforms designed to foster inclusive economic and social development for all sections of society," Bruce stressed.

TAGS: Pakistan | compliance | tax | tax compliance | tax avoidance | tax incentives | law | United Kingdom | education | tax planning | tax rates | individual income tax

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