DEATH by TAXES
By Shahir Hussain
It took a two page report and a video on their website by the New York Times to demonstrate to many young people the abysmal state of tax collection in Pakistan . Social media platforms like Twitter and Facebook were awash with outraged tweets and posts of the article which described how only 2.5 million people in Pakistan pay income taxes whereas there should be at least 10 million registered tax payers.
This is nothing new. Tax evasion is a game which is played in the highest echelons of power and emulated all the way down the power tree. Pakistan has one of the most regressive taxation systems in the world where the poor pay for the dishonesty of the rich via indirect taxes like the General Sales Tax (GST), levies on utility bills, petrol, medicines, and anything that they need to scrape out an existence. The rich keep buying their luxury vehicles and living in palatial homes which nobody will ever question. Most politicians’ income declarations enable them to apply for the Benazir Income Support Fund yet they drive cars worth millions of rupees.
Tax evasion didn’t just arrive inPakistan as a sport, we wrote the manual for it decades ago. But in October or even earlier things are going to get worse. The World Bank and the IMF have decided that it’s not funny anymore and if the government of Pakistan wants to borrow billions of dollars then it better start collecting more taxes. The political will to tax agriculture just doesn’t exist so we’re going to get hit by the Value Added Tax (VAT) or a modified GST which will again increase the burden of taxation on the poor people of Pakistan and the middle class. Incidentally these aren’t the people who are buying four wheelers yet they’re the ones the super GST is going to shaft the most.
Recently, I was present during a conversation between a non-resident Pakistani (NRP) and a friend who has worked at the IMF for a decade. The NRP was talking about using fool-proof technology to incentivize people to pay their taxes like his new home while the IMF-wala was trying to explain to him (rather unsuccessfully) that all the laws and systems in the world existed in Pakistan yet when it came to political and bureaucratic will we failed. He recounted a meeting with the former finance minister where the minister was talking about reforming the taxation and collection system — his observation was that the bureaucrats in the ministers’ team were smirking visibly as if to say “let him talk, he’ll be gone soon and we’ll be here for decades”. The said minister resigned soon after.
So what look like simple solutions to people with a few brain cells turn into complex collider experiments once they enter the machinations of the government ofPakistan . Everyone wants to know one thing and one thing alone, “What’s in it for me and mine?” This was not the public service our grandparents had in mind when the arrived in Pakistan sixty odd years ago. But the truth is that Pakistan is a large cow and there are parasites which have attached themselves to it for decades and there’s no one who’s going to pick the ticks off. There’s a reason why such few Pakistani businesses have succeeded like their Indian cousins internationally. The lack of political and bureaucratic support just doesn’t exist for them to succeed the way they have managed in Pakistan . Essentially we are a rent seeking economy where the seths have gotten a flavor for easy money without really feeling the need to pay taxes. The property business is a case in point with the fabled “file”. Say a commercial plot in Defence Karachi costs 1 crore PKR and an investor buys it.
The file will show the value of the file as 5 lacs PKR instead of 1 crore. Everyone knows this happens yet the FBR and the CBR can’t do anything about it because our political and bureaucratic leaders don’t allow it.
InIndia something very similar used to happen, until the Indian government announced that it would buy any property at the value stated on the file and pay a 25 per cent premium to the owner. Within months the files started to reflect the real value of the property and there was a massive increase in revenues for the taxation authorities. There are thousands of creative ways to plug the gaps without passing on the burden of taxation to the poor in the form of indirect taxes. Unfortunately all of them require the essence of public service to come back to the folks in Islamabad instead of being concerned about stuffing their pockets.
An interesting piece of research released recently demonstrates that the assets of our legislators double within two years of getting elected – and this is not a trend started by this particular Government, it’s something which happens with every government once it’s elected. October is around the corner and unless we can get our house in order and fast, there are going to be crushing indirect taxes which will be imposed on the masses and the middle classes. Buying SUVs requires money and the international community has decided that they’re not going to pay for them anymore.
The writer lives inKarachi . Email: shakir.thenews@gmail .com
This is nothing new. Tax evasion is a game which is played in the highest echelons of power and emulated all the way down the power tree. Pakistan has one of the most regressive taxation systems in the world where the poor pay for the dishonesty of the rich via indirect taxes like the General Sales Tax (GST), levies on utility bills, petrol, medicines, and anything that they need to scrape out an existence. The rich keep buying their luxury vehicles and living in palatial homes which nobody will ever question. Most politicians’ income declarations enable them to apply for the Benazir Income Support Fund yet they drive cars worth millions of rupees.
Tax evasion didn’t just arrive in
Recently, I was present during a conversation between a non-resident Pakistani (NRP) and a friend who has worked at the IMF for a decade. The NRP was talking about using fool-proof technology to incentivize people to pay their taxes like his new home while the IMF-wala was trying to explain to him (rather unsuccessfully) that all the laws and systems in the world existed in Pakistan yet when it came to political and bureaucratic will we failed. He recounted a meeting with the former finance minister where the minister was talking about reforming the taxation and collection system — his observation was that the bureaucrats in the ministers’ team were smirking visibly as if to say “let him talk, he’ll be gone soon and we’ll be here for decades”. The said minister resigned soon after.
So what look like simple solutions to people with a few brain cells turn into complex collider experiments once they enter the machinations of the government of
The file will show the value of the file as 5 lacs PKR instead of 1 crore. Everyone knows this happens yet the FBR and the CBR can’t do anything about it because our political and bureaucratic leaders don’t allow it.
In
An interesting piece of research released recently demonstrates that the assets of our legislators double within two years of getting elected – and this is not a trend started by this particular Government, it’s something which happens with every government once it’s elected. October is around the corner and unless we can get our house in order and fast, there are going to be crushing indirect taxes which will be imposed on the masses and the middle classes. Buying SUVs requires money and the international community has decided that they’re not going to pay for them anymore.
The writer lives in
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