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LONDON, April 4: Increase in British aid to Pakistan should be put on hold unless Pakistan’s government collects more tax from the rich and fights corruption effectively, a parliamentary committee urged on Thursday.

A planned 67 per cent increase to 446 million pounds in aid to Pakistan next year would make it the largest recipient of British development money at a time when the UK is cutting public spending at home.

“Development assistance should be conditional on the Pakistan authorities committing to and implementing economic reforms and policy changes that will foster inclusive economic and social development,” the International Development Committee said in a report.

Its chairman Malcolm Bruce added: “We cannot expect people in the UK to pay taxes to improve education and health in Pakistan if the Pakistani elite do not pay meaningful amounts of income tax.”

Only about half a per cent of Pakistanis paid income tax last year and no one has been prosecuted for income tax fraud for at least 25 years, the report said, citing the Pakistan Federal Board of Revenue.

The report added: “Making Pakistan the largest recipient of UK aid is controversial given Pakistan’s unstable politics, large defence budget, historic levels of significant corruption, tax avoidance, low levels of expenditure on education and health programmes and its status as a middle income country.”

Calling on the British government to use its influence at the International Monetary Fund to press for tax reforms in Pakistan, Bruce said a clear anti-corruption strategy was vital for Pakistan’s relations with aid donors.

Foreign aid amounts to 0.7 per cent of the UK’s gross national income and is one of only three sectors, alongside health and education, which has been ringfenced as other departments suffer deep cuts to their budgets.

In 2011-12 Britain’s overseas development spending reached almost 9 billion pounds, including that by the Department for International Development (DFID) and aid delivered bilaterally by other government departments, official statistics show.

DFID said it will help Pakistan to reform its tax system, but a spokesperson noted UK development assistance in Pakistan is predicated on a commitment to such reforms and to helping lift the poorest out of poverty.

No comment could be immediately obtained from the Pakistan High Commission in London but High Commissioner Wajid Shamsul Hasan, speaking earlier to the BBC, urged the UK to maintain its aid, adding that net tax collection had increased from Rs1 trillion at the beginning of the century to Rs2tr by the end of 2012.

“I would say that they should be paying knowing well what sort of problems we have put into by this long war against terrorism in the region,” he said.

“We have spent $67 billion since 2011 in this war against terror, our infrastructure has been destroyed, our education has been destroyed.”—Reuters