THE Central Board of Revenue has prepared an elaborate blueprint for maximisation of tax collection to be presented to President Musharraf for his approval this month. It would improve the tax-GDP ratio from its base of ten or eleven per cent and eventually take it to 15 or 16 per cent if implemented in toto. The World Bank and the IMF, too, have been urging such a profitable course.

The blueprint would bring under tax net all the major tax-evading sectors and introduce a scientific approach to taxing agriculture which is a very complex issue. It would propose gradual taxation of the tax-evading sectors and suggest means to control large-scale tax evasion and check political interference in the area of taxation particularly in the appointment and posting of CBR officials.

Even before the package is presented to the president, who will discuss it with the prime minister in latter’s capacity as finance minister, two big birds have flown out of the coop.

The first is the announcement by Prime Minister Shaukat Aziz extending the exemption from capital gains tax by one more year from July 1. The exemption goes on from year to year and has been there for too long now. That does not help the genuine investors as much as it rewards the speculators who buy shares and sell quick to make large profits. In fact, the whole stock exchange apparatus in Pakistan is designed to reward the speculators, the sprawling big fish in particular.

The second bird flew out when Dr Ashfaq Hasan Khan, advisor to the ministry of Finance said, that agriculture under the constitution is a provincial subject, which means the agricultural income tax could be collected only by the provincial governments. There is already an apology for an agricultural income tax in the provinces, but the tax collection through that is nominal. It is much too low in Sindh compared to Punjab which is low enough.

Even otherwise too little is expected to be collected through a new federal income tax on agriculture as the farm lords can show too many of their sons as highly paid farm executives and too many persons as workers on the farm. All that will reduce the taxable profits and eventually the tax collected initially may not be more than Rs 500 million, according to estimates. The reluctance to share the farm profits with others has stood in the way of corporate farming as well. Corporate farming calls for detailed accounting and access to those facts by the shareholders which the farm lords will resist.

The third area for large scale new taxes is the thriving real estate particularly in the luxury construction sector. But this too will be claimed by the provinces as their fiscal sphere. The CBR has collected the data for taxing the recent large incomes in this area but it may not be able to collect tax on those incomes. In fact the Sindh government has given up its revenue from the stamp duty of Rs15 for transfer of a hundred shares following the suggestion of the prime minister. This can mean considerable loss to the provincial government during a period of large transactions on the stock exchanges. The Punjab government has not followed suit.

In fact the whole issue of federal or provincial tax is in a state of flux following the setting up of a committee on provincial autonomy under Salim Saifullah, federal minister for inter-provincial coordination. The committee is to finalise the report this month suggesting the transfer of some of the 48 subjects in the Concurrent List to the provinces. Along with that should go the authority to the provinces to raise the needed finance for the purpose. Only after the report is accepted by the government and the parliament that we shall come to know the federal and provincial taxes. Provincial autonomy means the subjects are with the provinces, but the funds are with the federation.

Meanwhile the government has come up with three sets of figures. Two of them are unfavourable to it. The country suffered a trade deficit of $6.46 billion during the first half of the current financial year which is a record for all times.

It also suffered a current account deficit of $3.68 billion during the first five months of the current financial year which represents an increase of 22.5 per cent over the same period last year despite the soft loan of $6 billion received as earthquake relief fund and over $5 billion as home remittances.

But in the area of tax collection however it has been successful due to increased economic activity and larger corporate profits, particularly by large banks. It collected Rs409.2 billion in the first six months of the current financial year ending December 31, which is Rs37.2 billion above the target of Rs372 billion and Rs85 billion collected in the first half of the last financial year. It is a creditable performance.

With that kind of surplus revenues above the budgeted, the prime minister is able to reduce the petrol price by four rupees per litre and one rupe in case of diesel oil. He should not have hesitated so much and so long as the world oil price came down from the peak of 79 dollars a barrel to 53, he could have come up with the price reduction earlier and a larger cut in view of its budgetary leverage.

It is not only the Opec states which are interested in high world oil prices but also Russia which is the second largest producer whose president Vladimir Putin wants the high oil prices to prevail.

The State bank of Pakistan says total bank credit of Rs244 billion was provided to the private sector in the first half of the financial year. And that is Rs50 billion lower than the credit provided in the same period in the last financial year. If it did not have an impact on inflation, it is because the supply side of the economy is weak or the hoarders and the price manipulators are more successful.

Anyway, credit squeeze takes time for its impact to be felt in the market particularly in a country where too much money is afloat from several sources, including home remittances of over 5 billion dollars last year. Anyway the State Bank should continue with its tight monetary policy instead of giving a boost to the merry consumer banking.

The usually euphoric Dr Ashfaq Hasan Khan, advisor to the ministry of finance, was surprisingly realistic when he addressed the Management Association of Pakistan on the first half year’s economic performance by the government, in place of Dr Salman Shah, advisor to the prime minister on finance. He conceded that an inflation index that excluded food inflation and oil prices had small relevance in Pakistan. Food inflation in Pakistan, he says, is 40 per cent unlike five per cent in the developed countries. Similarly when the oil prices rose to 79 dollars a barrel, it could not be excluded from any meaningful inflation index.

He identified five factors where success is essential to sustain and accelerate 7 to 8 per cent economic growth annually. The first is a rise in the tax-GDP ratio from 11 or 12 per cent to 16 or 17 per cent of the GDP. A large increase in the volume of external trade, both exports and imports are imperative. Improvements in savings from the current 15 or 16 per cent to 25 per cent of the GDP are essential. Along with that investment should rise to 25 per cent of the GDP. Also imperative is an increase in the output to investment ratio. At present an investment of rupees three gave an output of one rupee to the GDP. That has to be raised to achieve a rupee more of output with an investment of Rs2.50. This is a crucial area so that the country is well rewarded for its investment which currently is low.

Currently, the country’s premier industry, the textiles, is facing a severe and sustained crisis. Its importance lies in the fact that it produces 11 per cent of the GDP, employs 40 per cent of the workforce and its exports form 62 per cent of the total which stood at $8.9 billion last year. According to All Pakistan Textile Mills Association, the exports have fallen by 3.33 per cent in the last six months compared to the same period a year before. It was earlier reported that $500 million worth of export orders have been diverted to Pakistan and later $600 million more were added to the credit of Pakistan in view of the political crisis and violence in Bangladesh. And yet the Pakistan textile industry is apprehensive of its future as it is not sure how long the crisis in Bangladesh will last.

High cost of production and high cost of doing business in Pakistan are pricing the Pakistani products out of international markets. Our exports have to be strong enough to compete with low prices in world markets and not lose more of the share of the textile market to India and China.

The textile mill owners complain that the government is taking too much time in coming up with the promised package of incentives. The government is giving the concessions in piecemeal like the debt swap concession announced by the State bank for the industry. What is needed has to be done quick and adequately. With the textile minister, being for the first time from the industry, and a minister of state too, the government should be able to move much quicker and save the threatened textile exports. Pakistan’s productivity growth and export problems should be tackled with greater vigour and imagination and not in the conventional manner as done in the easier times.

THE resurgence of the Taliban and the growing insurgency in the areas adjacent to the Pakistan-Afghan border have once again generated tensions between Islamabad and Kabul. Exploiting this unpalatable situation the Afghan government has tried to make the issue of the internationally recognised Durand Line a contentious one.

Regrettably, the Durand Line has been a source of friction between Pakistan and Afghanistan since 1947. Successive regimes in Afghanistan have refused to acknowledge the Durand Line as the international border between the two countries and have demanded the integration of Pashtu-speaking inhabitants on the Pakistani side of the frontier in Afghanistan or an autonomous, perhaps even independent, Pakhtoonistan. They have argued that the Pathans in Pakistan and Afghanistan form a single ethnic unit and should be united in one state.

The fact of the matter is that the Pathans living on the Pakistani side of the Durand Line enjoyed close political and economic ties with the major states of the Indus valley and had even developed linguistic differences with the Pathan inhabitants living in Afghanistan’s tribal areas.

It may be recalled that in July 1947, the Afghan government informed the British government that the tribesmen in the “free tribal areas” wanted to dissociate themselves from India (meaning Pakistan that would come into existence the next month). But, the governor of the NWFP, Sir George Cunningham, after touring the tribal areas and meeting the tribal chiefs, declared that the people wanted to retain the same ties with the new state of Pakistan as they had with British India.

After the establishment of Pakistan in 1947, Kabul argued that Pakistan was not a successor state to Britain. It was a new state that was carved out of British India and as such it could not inherit the rights of an “extinguished person” (i.e. the British India).

Regrettably, the Afghan government did not pay heed to the fact that under international law the treaties of an extinct state concerning boundary lines remained valid and all the rights and duties arising from such treaties devolved on the absorbing state. According to the Vienna Convention on the Law of Treaties, international agreements once concluded cannot be questioned, annulled or altered except through a bilateral agreement or force majeure.

In April 1947, the Quaid had declared: “The question of a division of India, as proposed by the Muslim League, is based on the fundamental fact that there are two nations — Hindus and Muslims. We want a national state in our homelands which are predominantly Muslim and comprise six units — the Punjab, the NWFP, Sindh, Balochistan, Bengal and Assam.”

It may be mentioned that in the referendum in July 1947, 289,244 votes were cast in favour of the NWFP’s union with Pakistan and only 2,874 for union with India. Yet, in March 1949, the Kabul press and radio had the audacity to launch a campaign demanding that the area between the Durand Line and the Indus, comprising the NWFP and the tribal territory, be recognised as independent Pakhtoonistan and given the right of self-determination.

The efforts made by Kabul to reopen the question of the Durand Line were rebuffed by the British government when the then secretary for Commonwealth Relations, Philip Noel Baker, declared in the House of the Commons in June 1949 that in international law Pakistan was the inheritor of the rights and duties of the former government of India and of the UK government in the territories of the North West Frontier and that the Durand Line was the international frontier.

As governor-general designate of Pakistan and again while addressing the tribal darbar at Peshawar in April 1948, Mr Jinnah had given a solemn assurance to the tribesmen that the government of Pakistan would preserve the special status of tribal areas and continue to adhere to all treaties and agreements entered into between the tribes and the British.

After independence, the government of Pakistan successfully followed this policy without any change in the special status enjoyed by the area. It, however, sought to achieve the integration of the tribal areas through development in communication infrastructure and other social sectors like education, health etc. This policy proved highly successful and had it been followed without interruption for another 20 to 30 years, tribal society would have been knitted into the national fabric and this would have ensured an effective writ of the government in the tribal areas.

Regrettably, however, the whole process of peaceful integration was disrupted when, following the US-led invasion of Afghanistan in 2001, hundreds of Al Qaeda operatives and the Taliban moved from that country into North and South Waziristan and other bordering Fata agencies. Pakistan, under immense pressure from the United States, deployed its military for the first time in Fata to prevent Al Qaeda and the Taliban from gaining sanctuary there.

The militants killed hundreds of military and paramilitary personnel as well as civilian officials. Yet, Kabul blames Pakistan for fuelling the insurgency in Afghanistan. Washington, while appreciating the efforts made by Islamabad against Al Qaeda and the Taliban, is also asking it to do more.

Islamabad’s military action in Fata has become the object of a contentious debate in the country. The government has come under scathing criticism for its actions, not only from opposition parties but also from some of its own supporters. The government’s attempt to justify its actions as a strategic necessity is unconvincing. A number of independent political analysts who also seriously question the wisdom of the deployment of Pakistan’s military in the tribal areas insist that Islamabad’s policy on this issue should not be tied to exclusively serving US interests. Pakistan also needs to safeguard its own long-term interests.

There is ample evidence to suggest that the Taliban and their Al Qaeda allies are regaining strength and starting their march into the political arena in the country with a view to playing a role in its governance. Some political observers, however, argue that in view of their bitter experience of the days when the Taliban had ruled their country the Afghan people would not allow them the political status they may be craving in order to pursue their radical objectives.

Nevertheless, one cannot ignore the fact that the Taliban, regrouped and reorganised, are now better equipped and could stick to a violent course to gain political power in Afghanistan. This could result in weakening the fledgling democratic process in Afghanistan. It is, therefore, feared that a policy of sidelining the Taliban may destabilise Afghanistan. Needless to say peace in Afghanistan is a regional and a global imperative.

In order to avert persisting instability in Afghanistan that is already being pushed towards chaos, it is desirable that the moderate elements among the Taliban are engaged and persuaded to abandon their militancy and move in a direction that would allow them to become normal political actors. Even if they want to enforce Islamic law, this should have the backing of the people that can only be assessed through free, fair and peaceful elections.

The writer is a former ambassador.

IN March, the British state will rightly celebrate the bicentenary of the end of Britain’s part in the slave trade. Yet ordinary citizens, as well as schoolteachers and makers of television programmes who may find themselves caught up in the prolonged bout of self-congratulation imposed by government fiat (with the help of £16m from the Heritage Lottery Fund), will do well to reflect on aspects of this anniversary that are not so praiseworthy.

In the first place, when remembering the parliamentary vote in 1807, we should also recall that the slave trade was, for more than two centuries, the central feature of Britain’s foreign commerce — endorsed, supported and profitably enjoyed by the royal family, and by the families of sundry courtiers, financiers, landowners and merchants.

The personal and public wealth of Britain created by slave labour was a crucial element in the accumulation of capital that made the industrial revolution possible, and the surviving profits have remained a solid element within specific families and within British society generally, cascading down from generation to generation, in John Major’s felicitous phrase. In this context, the demand for reparations is a serious proposition, similar to the claim put forward by the families of Holocaust survivors for the return of property stolen by the Nazis. Black people whose forebears were slaves, victims of that other Holocaust, are simply asking for the stolen fruits of their ancestors’ labour power to be given back to their rightful heirs.

Second, we should remember that the end to the trade came not simply from the useful agitation of Quakers, other Christian dissidents and parliamentary radicals, but also from the work of slaves who engaged in the propaganda of the deed, people who today would be described as “terrorists”. Driving the anti-slave trade agitation was the ever accelerating rate of slave rebellion experienced in the Americas and the Caribbean in the late 18th century, reaching a peak in the years of the French revolution.

It is customary to pay homage to the slave revolutionaries in Saint-Domingue, today’s Haiti, who rebelled in August 1791. They seized power, abolished slavery, and established the first black republic in the Americas. Yet other islands also saw serious uprisings by slaves and Maroons, who — at the time of the French-British wars — seized control with French help of large parts of Dominica, Guadeloupe, Grenada, St Vincent, Jamaica, St Lucia and Trinidad. Even where their actions were not eventually successful, the rebellions defeated two British armadas sent to destroy them, killing thousands of seamen and soldiers (with assistance from the French and from the twin weapon of malaria and yellow fever). They also deprived the British of income from their sugar plantations for years. Since those in the forefront of these rebellions were slaves recently arrived from Africa, the stark danger of the continuing slave trade to British commercial interests could not have been more graphically revealed.

Third, in considering the British achievement of 1807, we should remember that other countries got there first. Again, it is customary to record the decision of the French convention to abolish slavery itself, on February 4, 1794. Yet in the US, in spite of the wording of the constitution adopted in 1787 that endorsed the slave trade (at least for the subsequent 20 years), several states abandoned slavery. While the southern states grew rich on slave labour for another 70 years (until 1863), slavery was abolished in the 1780s in New Jersey and Delaware, and the trade was outlawed in Massachusetts, Connecticut, New York and Rhode Island.

The Danes were also among the first in the field, decreeing an end to the trade to their Caribbean colonies in March 1792 (though it continued until 1803). The British voted much the same way as the Danes at the end of a Commons debate a month later, declaring that “the slave trade ought to be gradually abolished”. The weasel word “gradually” was introduced by an influential imperial politician from Scotland, Henry Dundas, who thereby postponed the trade’s end for 15 years.

This long postponement is a further reason for this year’s anniversary to be celebrated in a minor key, for the continuing trade allowed the evil practices of the Atlantic passage to continue, as well as permitting the British to purchase black people in the slave market to serve in their imperial wars. Black people were imported from the slave market in Goa and from Mozambique to fight a war of conquest in Ceylon, while 13,000 slaves were bought in the Caribbean to help in the suppression of slave rebellions. Black battalions were formed in several islands after 1795, and the soldiers were promised freedom when hostilities ended. Since the promise was often forgotten, the rebellions on one side were followed by mutinies on the other, both leading to a horrendous litany of floggings and executions.

A fourth aspect of the slave trade ban should not be forgotten: the vote of 1807 was not always respected. The British in Asia continued to take advantage of the continuing trade. The governor in Mauritius, conquered in 1810 from the French, sought to befriend the existing French settlers by allowing them to continue importing slaves, some 30,000 between 1811 and 1821.

The vote did not put an end to the international trade by other nations, nor did it terminate slavery. Several countries continued the trade, with half a million slaves arriving in the Americas in the 1820s, more than 60,000 a year. About 3,000 slaves were still being landed annually in Brazil in the 1850s. Slavery itself was not abolished in the British empire until 1838, in the French empire in 1848, and in the US in 1863. Spanish Cuba continued with slavery until 1886, and Brazil until 1888.

One lasting and dubious legacy of 1807 has been the sanctimonious interventionism that has survived in Britain for two centuries, and still motivates contemporary governments. The British navy was given the task of patrolling the Atlantic, to police the continuing international trade from Africa to Brazil, Cuba, and the US. The West Africa Squadron began surveying the coast of Africa, and securing the naval bases that would make easier the task of imperial expansion later in the century, when east Africa was brought into the frame. Parliamentary radicals, however, were always opposed to the policy, arguing cogently in the 1840s that “our unavailing attempts to suppress the traffic worsened the lot of the slaves by making the misery of the Middle Passage worse than ever”. Yet their opposition was ineffective. The naval squadron was not phased out until the 1870s, but by then Britain’s taste for empire had become well established.

The navy’s activities gave the British a taste for international action that has survived long into the post-colonial era. Tony Blair’s speech in Plymouth last week, on Britain as a “war-fighting” nation whose frontiers reach out to Indonesia, last included in the empire between 1811 and 1816, was emblematic of the new enthusiasm for imperial revival, echoed by Gordon Brown’s repeated remarks that the empire gives us nothing to apologise for.

The final tragic aspect of the decision to end the slave trade was its arousal of the false expectation among slaves that their servitude might soon be abolished. It was to be more than 30 years after 1807 before the British finally abandoned slavery in their empire, years that saw major slave rebellions in Jamaica, Dominica, Barbados, Honduras and Guyana. All were savagely repressed. Some participants claimed that the trumpeted news of an end to the trade had led them to believe that slavery itself was over, a mistake that some people still make today.

— Dawn/Guardian Service