KARACHI, Jan 17: Robber barons are back in seat of authority with their unlimited money power to effectively counter any government move to bring them in tax net, document their transactions, slash their profits to acceptable limits, discipline their business conduct and make their balance sheets and statement of accounts a little more transparent and comprehensible for the general public.
Income inequalities and regional imbalances are growing to new heights and are much more conspicuous now than what were visible in late Ayub Khan’s infamous decade of development during sixties.
There are more unemployed young men now on the roads and streets than those seen in late sixties. Purchasing capacity of those employed in low positions in government and private jobs in late sixties was much better than those, who are employed in same categories now.
The backlash in late sixties was severe and intense. Ayub Khan was over- thrown and pent up frustrations and anger eventually caused a break up of Pakistan. Angry people voted overwhelmingly for the radical parties in 1970 elections that promised nationalisation of trade and industry and land reforms.
Stock operators were exempted from capital gains tax since 1974, when late Zulfikar Ali Bhutto, in a bid to oblige the angry businessmen, removed his radical finance minister Dr Mubashar Hasan from his cabinet. Nowhere in the world, is the speculative business of companies’ shares being patronised so unabashedly as in Pakistan for last more than 30 years.
In India, the exemption from capital gain tax is given after qualifying a holding period of six months to one year. In Pakistan, any company’s share may be transacted 100 times in a day, with each transaction bringing additional money to its trader, and it may be 100 times more than face value, without being taxed.
In 1995, the PPP government in Sindh wanted to levy a small capital value tax on shares trading. It was put off and was put in operation this fiscal year at a very small and insignificant rate. “It’s not the rate of tax, but psychological impact,” was an explanation dished out by the stock brokers.
The small tax and that too on a very limited scale was resisted with full might and had finally to be withdrawn.
A little earlier, the Central Board of Revenue (CBR) wanted to launch a nexus programme on computer that would have given details of real estate business, utility bills and other harmless information about a selected group of stock brokers. This programme too was dropped.
In last six years or so, a new class of stock brokers, may be two dozens or so, has been created, who set rules and then violate with impunity. They are in the stock business and have big stakes in banks, financial institutions, service and manufacturing companies, real estate, air lines, transport, utilities and almost every business.
The Monopoly Authority died of “unwept and unsung death” last June when the 2006-07 budget was presented and is replaced by an equally toothless and ineffective body namely Competition Commission. But the business of monopolists and oligarchies go on.
No wonder, a few stock brokers offer Rs10 million worth of sacrifice on Eidul Azha of animals imported from Australia. They set up food stalls at 100 odd places in the city in Ramazan for the benefit of those Muslims who are fasting.
They are regular suppliers of Iftar at Holy Ka’aba in Mecca and in Holy Prophet’s Mosque in Medina for the whole month of Ramazan. But the vast majority of Muslims in Pakistan remain unemployed, uneducated, under nourished and devoid of any hope as there is no tomorrow for them.
For last four years, there is a lingering sugar crisis. In the year 2006, sugar prices increased by almost 100 per cent from Rs21 a kg in January 2006 to Rs42 a kg sometimes in October at the advent of Ramzan. On Wednesday, the millers have persuaded the government to keep sugar price at Rs31 a kg and the Trading Corporation of Pakistan will not bring its stocked sugar in the market.
The story is not different for cement where powerful cartels cut their production to create artificial shortages and raise the prices. Even the auto assemblers, who cater to the demands of consumers who are equally powerful and rich but were forced to pay premium on booking of the cars.
Bankers are the new emerging elite rentier class in the country that thrives on a bank spread of 7 to 8 per cent between the rates of interests being offered to the savers and to the borrowers. On December 2, 2006 State Bank Governor Dr Shamshad announced to intervene in the matter to ensure that small savers get some relief by way of return that can neutralise at least the inflation rate that is now close to double digit.
All banks are now set to declare fabulous profits. The National Bank of Pakistan, the only government’s bank is likely to lead with a fabulous profit of Rs26 billion followed by Habib Bank, Muslim Commercial Bank, United Bank and others.
In 2005, the banks earned a handsome profits and a selected class of bankers in the NBP as well as those in the privatised banks were given reward bonus of Rs30 million. Low paid employees from the NBP and privatised banks have been thrown out of jobs recently and as far back as 1997. The government pumped in Rs21 billion taxpayers money into two big banks—-Habib and UBL—-and wrote off and restructured billions of default loans.
It in this milieu that political parties are drawing up their manifestoes for next elections. Religious political parties—-Jamat Islami and Jamiat Ulema Islam—-are expected to give a radical, may be an ultra radical socio economic programme, to break the powerful business groups and counter growing influence of feudal.
A strong in-fight is going on within the PPP ranks where radicals started organising weekly study lectures on socio economic issues. Those, who joined PPP after 1971 power takeover and consolidated their positions during eighties and in two terms of governments in nineties, are in no mood for a radical shift. They insist on privatisation, liberal trade, free business with some reforms.
The PML (N) is also expected to be for free enterprise with some reforms in agriculture.