During Ramadan, Pakistanis dodge tax collectors

KARACHI, Pakistan (AP) ? During the Muslim holy month of Ramadan, Muhammad Tashfeen Khan does what millions of other Pakistanis do: tries to keep his money from the government's religious tax collectors.

The wealthy businessman pulls all his savings from his bank account right before Ramadan starts so the government cannot deduct 2.5 percent as zakat, the annual donation many Muslims are religiously required to make as a basic tenet of the Islamic faith.

Khan and many other Pakistanis do this, not to avoid paying zakat, but to make sure the money doesn't go to the government, which is viewed by most people as incompetent and corrupt.

For many years, Pakistan required all Sunni Muslims, who make up a majority of the country's population, to pay zakat straight to the government. That regulation changed recently, but many Pakistanis seem unaware and continue to pull their money out of the banks to elude the state.

Instead, they pay zakat to needy individuals and hundreds of private charities operating in the country ? some of which are actually fronts for Islamist militant organizations seeking money for both social welfare activities and militant activity.

"When it comes to zakat, or any other religious issue, I can't trust the government," said Khan, who runs a chain of private schools in the southern port city of Karachi. It's a "corrupt system, which hardly cares about the poor," he said.

A former religious affairs minister was imprisoned last year for allegedly cheating hundreds of thousands of Pakistani Muslims out of money while they were making the annual Hajj pilgrimage to Saudi Arabia.

Khan said he gives over $1,000 to individuals and private charities every Ramadan, an amount he indicated was greater than what he would pay if the government deducted zakat from his bank account. Ramadan began in July and is expected to end in the next few days, depending on the sighting of the new moon.

"By taking matters in my own hands, I am satisfied that it goes to the deserving people and charity organizations," said Khan.

Many Pakistanis apparently feel the same way, and use his same bank trick, based on evidence from how much the government collects in zakat from bank accounts versus how much money is in those accounts.

Last year, the government collected a little over 1 billion rupees ($11.5 million) from savings and fixed deposit accounts at the beginning of Ramadan, said Syed Wasimuddin, the spokesman for the State Bank of Pakistan.

That figure equals only about 0.3 percent of the 320 billion rupees ($3.4 billion) that was in those accounts in June 2011, before Ramadan started, according to data posted on the State Bank's website ? far below the official 2.5 percent zakat tax rate.

Some of the difference can be attributed to the money in accounts owned by non-Muslims and Shiite Muslims, who make up about 25 percent of the population and are exempt from paying zakat, as long as they provide the government with proof of their religious affiliation.

Pakistan made the payment of zakat to the government mandatory for Sunni Muslims in 1980 under the military dictator Gen. Zia-ul-Haq, one of a variety of actions he took in an attempt to make the state more religious. The government has allowed Sunni Muslims to file a certificate of exemption in recent years, but knowledge of the change doesn't seem widespread.

The way zakat is handled varies among Muslim countries.

In Turkey, zakat is voluntary and is not paid to the government at all. It is also voluntary in Iraq, but the process is handled by government departments that manage religious affairs for Sunnis and Shiites. Zakat is mandatory in Malaysia and is collected by the government, but the law is generally not enforced against those who don't pay. Payment is also mandatory in Indonesia, but donors can give money to either the government or private organizations.

Bashir Farooqi, chairman of one of Pakistan's largest private charities, the Saylani Welfare Trust, said the group collects more than $10 million every year from zakat and uses it on projects that range from free meals for hundreds of thousands of people to interest-free loans to jobless men trying to set up their own businesses.

"How can one trust the government?" said Farooqi.

Another big recipient of zakat payments every year is Jamaat-ud-Dawa, which is widely believed to be a front organization for the banned militant organization Lashkar-e-Taiba, although the group denies this.

Lashkar-e-Taiba militants are blamed for attacks in the Indian city of Mumbai in 2008 that killed over 160 people.

"We spend millions of rupees every year for the education of the poor, health projects and reintegration of disaster-hit victims," said Jamaat-ud-Dawa spokesman Yahya Mujahid.

The Pakistani government often claims that it is cracking down on banned militant groups, but many continue to raise money and operate without official interference.

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Associated Press writers around the Muslim world contributed to this report.

Source: http://news.yahoo.com/during-ramadan-pakistanis-dodge-tax-collectors-121532124--finance.html

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