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Tax reform, not aid please


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THE BBC has reported that a group of British MPs have asked the British “government to withhold extra aid to Pakistan unless the country does more to gather taxes from its wealthier citizens”.

This will evoke a strong reaction in many circles in Pakistan. It is shocking that we have shameless people here — many having been associated with policymaking — who treat foreign aid as a yardstick to measure the success or otherwise of Islamabad’s foreign policy.

They have no qualms about going with the begging bowl in hand to foreign capitals. They will be irked by the British MPs’ statement no doubt. Some will see it as an anti-poor stance.

Anyone who understands the dynamics of international politics knows that foreign aid always comes with strings attached, even when they are invisible. Sometimes the conditions are tough, but implicit, and they actually harm the country’s economy. Examples are legion of how ill-suited projects have added to the country’s debt burden without any benefits having accrued to the recipient country.

Worse still, a prolonged unequal relationship of dependency between the aid giver and the recipient spanning an indefinite period of time can actually reduce the weaker partner to a client state, something like the banana republics of Latin America of yore. This relationship enables the aid giver to exercise control over the smaller country.

This reminds me of the words of wisdom coming from our world-renowned scholar of anthropology, Hamza Alavi, who wrote in 1961 that the goal of development of a balanced economy is distorted by the pressures which are brought to bear upon the planners when aid givers are involved. Needless to say the pressures are greater in military and security matters.

More upsetting are the changes that have come in the psyche of our leaders as well as the people. Initially a loss of self-esteem was the price we paid for accepting foreign aid. That also brought a sense of embarrassment.

There was a time when no political leader would ever admit publicly that he was toeing an aid giver’s line as he was under pressure. Now no one conceals the strings and aid is regarded as a matter of right. Aid has made us a nation of beggars. There is no loss of dignity involved when ‘aid’ is sought and accepted. Worse still, a lot of this aid is embezzled and squandered brazenly. An abundance of liquidity has fuelled corruption and ostentation.

There are times when economic contingency demands that aid be accepted. But it should be for a defined period and to tide over an unforeseen emergency the country is facing. To make the national economy dependent on foreign resources on a continuing basis for current expenditures is simply unforgivable. We need planners with self-respect who do not hold this nation of 180 million hostage to foreign governments with their own agendas.

There is also the moral dimension that cannot be ignored. The BBC reported, “The International Development Committee said British taxpayers should not be paying for health and education in Pakistan while rich Pakistanis were paying little tax. They also urged ministers to ensure aid was focused on anti-corruption efforts”.

This is very telling as it reflects on the dichotomy this country is saddled with. On the one hand, we have filthy rich leaders and businessmen who do not even file their income tax returns. On the other hand, some economists claim there are up to 120 million or so men, women and children who live below the poverty line — not because the country lacks resources but because of unequal distribution of wealth and the refusal of the rich to pay their taxes.

There are others who have robbed the banks of billions in the form of loans that are not repaid. Since they are also policymakers they bend and twist rules to their advantage. Can they be condoned for whitewashing their sins simply because they claim to be the elected representatives and technically have the power to set the rules?

It all boils down to tax reforms, an honest tax collection machinery, and, above all, good governance. The BBC report said that only 768,000 individuals pay income tax in Pakistan. We know that others with clout, especially the political elite, navigate their way round the tax officers or enter into agreements with them. Since they also control the levers of power they ensure that they escape direct taxation. That is why indirect taxation is so high — 62 per cent of all revenues collected. But indirect taxation amounts to taxing the poor.

The fact is that not all people lack social responsibility. It is a paradox that many who evade taxes are extremely generous in the charity they give, which places Pakistan at the top of the list when it comes to philanthropy. It is basically a lack of trust in the government which is known to be inefficient and corrupt that leads many to tax evasion.

The political elite is, however, in a position to lead the reform process. Change has to start from the top and those who lead this process must be on the moral high ground themselves.

Note: Last week I erred in my reference to the Population Council. It is a non-governmental organisation working globally in 15 countries, with its headquarters in New York.

The views expressed by this writer and commenters below do not necessarily reflect the views and policies of the Dawn Media Group.

Comments (13) Closed

Shahzad Latif Apr 10, 2013 03:58am
I am more interested in knowing what the plans are for tax defaulters including thetwo third lawmakers. So far, not even a single party has added that to its manifesto. For how long would we continue begging money from other countries?
Aarif Bandukwala Apr 10, 2013 05:29am
Everybody should pay taxes, even if it is one rupe. Every business should pay taxes even if it is one rupee. The government provides services ( roads, railways, other infrastructure, currency, even our bloated army) and these services must be paid. Tax rates should be very low and should plateau off at 25% . Maybe 25% is too high.
Ahmed Apr 10, 2013 05:40am
I will not be surprised to find out that the so called "aid" that is given by the developed countries is actually only a small fraction of what our politicians, civil and army bureaucrat and businessmen pump into their economies every year by siphoning it off from the poor people of this country. an impartial assessment shall probably enable us to actually turn the tables and tell them that their tax payers are definitely NOT paying rather it is the poor person in Pakistan who is paying for this peanut of an aid.
Faraz Hussain Rahu Apr 10, 2013 06:57am
excellent anaylysis
Akram Apr 10, 2013 08:17am
tax reform in Pakistan will create revolution in Pakistan, where it no longer needs a begging bowl, and will no longer need foreign countries like the US. Its shocking that out of 180 million people less than 1 million pay income tax. these people can be hunted down if the will is there. As its election time we should be asking the candidates what their plan is for tax reform. if they have none, you know they are not worth a vote.
Thiru Apr 10, 2013 08:35am
"It is a paradox that many who evade taxes are extremely generous in the charity they give, which places Pakistan at the top of the list when it comes to philanthropy. It is basically a lack of trust in the government which is known to be inefficient and corrupt that leads many to tax evasion." This excuse should not be given to the wealthy of Pakistan, India or any other country (tax evasion and avoidance of wealthy corporations are robing the world's citizens). It is risible. If the government is inefficient and corrupt, there are enough educated Pakistanis and Indians with honesty and integrity to get involved in the political process and change that rather than take off to USA and UK if and when they can.
XYZ Apr 10, 2013 09:15am
All that we need is a self- esteem to stand up, our selfish leaders greed and lavish mindset has changed our country into a security state which surely has the potential to be a welfare state. Besides family politics and corruption our national saving is low from all other developing countries. up till now everybody wanted to gain wealth and respect by looting and deceiving his countrymen and motherland but now its time for our leaders to give something to his nation on other hand Pakistan is no more hospitable for its people..
khan Apr 10, 2013 10:17am
cant agree more
Mohammad Ali Khan Apr 10, 2013 11:46am
If all pay taxes due to them means a great transformation.It is a quality of an honest society.With this comes other attributes like discipline,patience,compassion,respect for merit.respect for hard work and good governance.A revolutionary step.
Dinesh Apr 10, 2013 03:35pm
Absolutely correct. If every citizen of the country paid their taxes, then they will each have a stake in the country. Then they will have more to be angry about if their taxes are stolen by corrupt politicians. If a citizen doesn't pay any tax, then he doesn't care who steals the money. None of it is his.
marghoob ahmed siddiqui Apr 10, 2013 06:08pm
You can't expect a country where 70% population is not in tax net and remaining 30% also try to pay as little tax as they can. This is because every one knows what happens to tax he pays. If it is to go in the pockets of rulers and burecrats what is the use of paying it. We have become shameless and only GOD can change us if he wants to.
aditya Apr 10, 2013 10:13pm
well like he said its become a habit..get used to it
Imran Apr 11, 2013 10:50pm
God only helps those who help themselves