Widening tax net

STATE Bank Governor Dr Ishrat Husain has once again stressed the need for a broader tax base in Pakistan and has linked this to a possible reduction in tax rates and a withdrawal of surcharges from utility bills. Addressing officers of the large taxpayers unit in Karachi last week, Dr Husain said that about Rs 80 billion were collected on account of surcharges under different heads, and that these could be given back to consumers once the tax base was broadened, leading to a higher revenue collection. The SBP chief maintained that there should be at least three million tax-payers in the country, as against the present number of 1.7 million. Under the present circumstances, the limited number of tax payers in Pakistan has meant that the government has increasingly relied on indirect taxes to raise revenues. In addition, Dr Husain has pointed out that, with each passing day, the principle of generating revenue through customs duties and tariffs is fast dwindling. This is as a result of Pakistan’s commitment to lower tariff rates under the various agreements it is signatory to.

Widening Pakistan’s narrow tax base has been a challenge that most governments have not been able to meet despite all intentions to do so. Over the past few years, the government has used the policy of carrot and stick, but even this has not yielded the desired result. On the one hand, tax rates have been reduced and rationalized, with tax-payers being given a variety of options and incentives. On the other, a massive drive was launched a few years back to unearth tax evasions and cheating, with exemplary fines and punishment for those who were found guilty. Neither of these tactics was able to widen the tax base or increase collections from direct taxes significantly. The problem perhaps lies not so much with the tax-payers or the tax system as with the tax collection agency, the Central Board of Revenue.

On the performance of the CBR, Dr Husain told his audience that the organization’s revamping was taken up by starting a reform process. No longer was emphasis placed on setting up targets for revenue collection. A simplification of tax laws, self-compliance, and minimizing the contact between payers and the collectors were some areas on which the government has been concentrating. While this approach should be appreciated, the government should now move towards its commitment of providing autonomy to the CBR in respect of its financial and administrative functions so that the organization could carry out its own recruitment, postings and transfers and devise its own policies. In this regard, the proposal by a visiting World Bank team for a separate law for granting autonomy to the CBR so that reforms are not only executed but are also sustained should be given due consideration. What is needed is an integrated approach towards making the CBR more efficient and introducing laws that would allow the organization to sustain these reforms. If this is not done, and the tax base stagnates at the present levels, the government would have no option but to resort to heavy borrowing as was done in the past. If this happens, the economic gains made in the past few years would come to naught.

Karzai’s correct move

THE clipping of the powers of Ismail Khan, Herat’s powerful governor, by President Hamid Karzai is the first indication of his administration’s resolve to extend Kabul’s rule throughout the country. Ismail Khan retains his governorship, but he has been stripped of his military powers in keeping with a decision taken some time back that governors should not be military commanders. There were several charges against Ismail Khan. Apart from being responsible for human rights violations, he has also tried to monopolize the customs duties from the thriving trade with Iran. Unfortunately, Ismail Khan is not the only governor with whom Kabul is having problems. Uzbek warlord Rashid Dostum is no better. He has refused to obey Kabul’s edict, and did not move over to the capital city when he was offered a major post in the “central” government. Dostum jealously maintains his militia and is known to flout Mr Karzai’s orders. He is also annoyed over the preponderant role which the Panjsheri group is playing in the Karzai administration. The Panjsheri influence also causes heart-burning among sections of the Pashtoons, who constitute Afghanistan’s largest ethnic group. Gul Agha, Kandahar’s anti-Taliban governor, has also been called over to Kabul. He too had refused to part with Kabul’s share of customs duties on trade with Pakistan.

The challenges before the Karzai administration are enormous. It has so far failed to raise a sizable and well-trained army, while the International Security Assistance Force (whose duties have now been taken over by Nato) has refused to go beyond Kabul. The remnants of Taliban continue to exist, and their raids have caused a lot of misunderstanding between Kabul and Islamabad. Between now and the general election due next year, the Karzai administration would do well to set modest goals for itself. These should include making his government a little more broad-based; removing the grievances of the Pashtoon community, and getting the international community to extend its role beyond Kabul so that the warlords could be reined in and Kabul’s authority progressively extended to the outlying provinces.

Will more laws really help?

AT A seminar in Rawalpindi, speakers called for the enactment of new laws to safeguard the rights of women. The Speaker of the National Assembly, who was the chief guest, also said that if these laws were formulated in the light of Islam, women and other downtrodden sections of society would get their rights without any struggle. Statements such as these underline the failure of our leaders of opinion and legislators to understand the nature of the problem women face in this society. The issue is more complex than it is made out to be. There are some areas which are over-regulated — at times through laws which are anomalous, anachronistic or retrogressive. These are virtually of no help to women. If anything, they create more opportunities for male chauvinists, exploiters and those with evil motives to oppress and brutalize women. True, there are some sectors where better laws are needed to alleviate the sufferings of women. But such cases are rare. Take the case of the demand for a law against karo kari. The fact is that murder is a crime under the law of the land and even in the absence of a piece of legislation specifically directed at this heinous practice, a person guilty of honour killing can be booked.

From time to time governments have promulgated laws governing dowry, violence against women and marriage and inheritance. But these have not made a dent in the status of women. Not only have these laws been violated with impunity, they have also been abused by the police and the administration to gain personal advantages. Hence it is plain that the problem lies not so much in the absence of laws. It is their non-implementation which lies at the root of the malaise. There are also the deeply ingrained socio-cultural prejudices and practices which make life so difficult for women. Many of these can be changed through social campaigns to educate and mobilize men and women. There is also need to inject a pro-woman orientation in our school textbooks and syllabi to create a more positive mindset among people. As for laws, the first step should be a drive to have the existing laws implemented.