Taxes and economic revival

Khwaja Wajih-u-Din
In our country Pakistan, the numberS of Taxes are many. There are central Taxes, then there are provincial Taxes and then local Taxes following one another. Thanks to the debacle in the last few years when any poor person buys essential items/or basic needs from the market, he has to pay taxes on it. Even the electricity bills has many taxes including the income tax. This form of indirect taxes is the biggest burden on every common man, which ultimately results in price hike. Interestingly we hear a similar statement from every finance minister, in every budget, that the poor have not been burdened.
The position as of today is that the Government is faced with a precariously poised near bankrupt official economy characterized by the problem of twin deficits, fiscal and balance of payments, touching almost fatal levels, The long running imbalance between government revenue and expenditure resulted automatically in large and growing budget deficits in all the years. During the last several years, the successive governments financed budgetary deficits by borrowing both externally and internally. This naturally resulted in rapid accumulation of debt servicing liabilities, and as of today a major chunk of our budget is meant for the same. Ultimately the whole program of expansion, development, health and education facilities etc. has to be drastically reduced. No Government wishes to deprive its people with all possible facilities, but the financial constraint does not permit it. The same is the case in our country.
We have been told by successive governments that they are in dire need of funds and are exploring various channels for the ultimate materialization of its policies. The most common of these is repeated begging before the international monetary fund and our friendly nations. No wonder the derogatory treatment an average Pakistani gets at the international airports. It speaks volumes of our impression in the international community. A statement by the former prime minister of Pakistan bears testimony to this fact. Obviously beggars cannot be choosers.
We hear about the importance of investment every day. It is no secret that red tape is a major hurdle in the safe investment along with the behavior, methodology and process of the government machinery. Even the overseas Pakistanis feel reluctant to invest in their homeland for the fear of the said hurdle. That directly contributes towards absolute retardation of the entire process. Over and above the tax rates are so high that the investor is completely discouraged. One should learn some lessons from other developed countries of the world like Japan where industries Spurred up in a relatively short time due to absence of controls and now their exports have reached unprecedented levels. Hong Kong, Korea, China etc are other examples.
On the streets a person with the meanest intelligence would point out how the law of the land has been persistently floated by all those who matter. The predicament is that in our beloved country nobody has the will to discharge his national duty, including the rich and the influential, the politician, the feudal lord, big businessman and so on. All evade taxes with impunity. This is the case with the majority of such people. Tax collection comes only from the poor and the middle-class, who work in unfavorable conditions and even contribute to the federal exchequer willingly and voluntarily.
The most important of all the taxes is the income tax. It is levied on the income earned by a person from any source. Of course agricultural income has been kept immune from income tax, which is a measure based on political expediency. The reason for it is that since its very inception, the governments have been dominated by the feudal lords, who do not wish to contribute their share towards national reconstruction. On the basis of perpetual brute majority in the assemblies they successfully managed its avoidance.
The World Bank urged its imposition repeatedly but successive governments in Pakistan managed to sidetrack the issue. Recovery of Incometax presents a very dismal picture. The Active Taxpayers List (ATL), shows the number of participants to be 4.38 million. Only a fraction of the total population, in single digit, pays income tax. Which is very mean figure by any stretch of the imagination. Imagine a Big Country thronging with Industries shopping plazas, big limousines and the lavish standard of living of many, beyond the reach of even Americans, the tax collection represents a dismal figure.
Without prejudice to the above but in addition there too it can be safely said that the evasion of tax in our country has reached unmanageable proportions. The evil of black money is there for everybody to see. Very many causes can be given for the operation of black money in the country, but the fact remains that its existence on such an unprecedented scale is a source of abundant worry for the economic experts of the country, as well as the government. This money cannot be taxed properly and is being used for ostentatious pursuit and expenditure. The evasion is sought to be achieved through “benami” transaction, under invoicing and over invoicing and inflation of expenditure etc., the holders of black money resort to purchase of gold and precious stones, luxury items and under recording immovable property, besides enjoying a very high standard of life. All this ultimately effects the general economy of the country, and the average man feels frustrated, because human urge is always there.
The Governments from time to time have thrown various incentives to ensure that untaxed money is brought into the central Exchequer, but the results have been far from satisfactory. It is no secret that the privileged class does not want to pay taxes. The uppermost class which is the moneyed class has always hoodwinked the process, and exploited every situation to their advantage.
They have flouted all the laws with impunity and never paid their share of taxes. These classes are largely responsible for the whole scale evasion of taxes. The IMF has recently emphasized that “those who can, those that are making good money, public sector, private sector, they need to contribute to the economy.”
Another important factor which needs mention here, would be the non-existence of Social Security, unemployment allowance and age old benefits which exist in the western countries but are nonexistent here. In ultimate analysis text evasion is a moral problem and depends on the degree of enlightenment and moral fabric of a society.
Talking of morality I was remember to have been informed by at least three people, proudly, that they enjoyed a monthly salary at the expense of the Pakistan steel mills in Karachi without actually working. All these petty personal gains have reduced the said national asset to be a burden on the people of Pakistan. There are many projects like that for example the Pakistan international airlines. As a nation we need to work on our ethics and morality on emergency basis.
The policy of privatization is indeed a step in the right direction provided it is done expeditiously in a fool proof manner. Ironically this policy of privatization, is being criticized by vested interest, including banks and executives who have been using trade unions etc. to create hurdles in the same. In actual fact both are directly hit by this policy, the former would lose their authority, and consequent benefits, and the later that is the trade unions would have nothing to exploit. If the banks are in private domain, the owner would not tolerate carelessness or slackness, nor would he allow anybody to play the truant. We can see the example of privatized banks and their function is so smooth because there is no government control. Whereas public sector banks manager thinks himself to be an officer and does not care for the public at large. The bank staff knows all this tricks of the trade and therefore, they want the present situation to continue so that they are not required to concentrate more and more on their work. In national interest all sick segment of public sector organizations need to be privatized to put less burden on the budget.
The recently constituted Special Investment Facilitation Council is indeed the right step. It should include more professional people who know their job well and are honest. The recent steps introduced to control the black market shows that if there is will there is a way. We need to put our house in order before it is too late.
(The writer is former Registrar Peshawar High Court)