• by Zofeen Ebrahim (karachi, pakistan)
• Thursday, October 07, 2010
• Inter Press Service

It was meant as an appeal to generous souls, but a suggestion for a one-time tax to help raise funds for Pakistan’s millions of flood victims has instead reminded many Pakistanis of their country’s faulty tax system.

Indeed, many are peeved by President Asif Ali Zardari’s proposal for a tax to be imposed on Pakistan’s 'well-off' and 'people of means', with several like 50-something accountant Munaf Lakda downright seething.

'I most definitely protest and would not pay the flood tax at all if I can avoid it,' says Lakda. 'Just pick up their (ruling elites) income tax returns and compare it to mine — it’s ridiculous how little they pay, if they pay at all!'

'It is another gimmick to skin the poor middle class who are already going through a tough time to make both ends meet,' Fouzia Mapara, a young journalist, adds.

It is not that Pakistanis are not generous lot, since many have expressed willingness to help the estimated 18 million people affected by the floods that inundated large parts of Pakistan two months ago. Zardari’s tax proposal, however, has hit a raw nerve in this South Asian country where government officials are among those said not to be paying the proper amount of taxes.

A recent media report says that many ministers — majority of whom are feudal lords with big land holdings — including Prime Minister Yusuf Raza Gilani, paid taxes based only from their salaries as lawmakers, not from their private fortunes. There are even ministers who have paid less than 10,000 rupees (117 U.S. dollars) as their annual income tax.

A report on Pakistan's taxation system by the Washington DC-based Carnegie Endowment for International Peace confirms that fewer than three million of Pakistan’s 180 million people pay any income tax. It also says the country’s tax- to-GDP ratio stands at just nine percent.

According to economist Haris Gazdar, a tax-GDP ratio is low 'in 'strong arm' military governments as well as 'weak' civil governments'. Akbar S Zaidi, the Pakistani economist who authored the Carnegie report, writes, 'Pakistan’s lack of a proper tax and revenue regime has resulted in high rates of tax evasion, burdening the country with unsustainable debt and undermining its development priorities.'

Pakistan’s tax system is apparently so dismal that in September 2010, the country’s biggest creditor, the International Monetary Fund (IMF), told Finance Minister Abdul Hafeez Sheikh that an 11-billion-dollar emergency loan programme would be frozen until Pakistan fixed its tax collection system.

U.S. Secretary of State Hillary Clinton has also commented: '(Countries) that will not tax their elites but expect us to come in and help them serve their people are just not going to get the kind of help from us that they have been getting.'

'There’s got to be some reciprocity here,' she said. 'You cannot have a tax rate of nine percent of GDP when big landholders and all the other elites do not pay anything, or pay so little that it’s laughable.'

Such remarks from outsiders may have prompted Zardari to try asking Pakistanis themselves to help the government come up with the estimated 43 billion dollars needed to rebuild infrastructure damaged by the floods, the worst in many decades, and for the relief and rehabilitation of the those rendered homeless by the calamity.

In suggesting the one-time tax, the President had noted, 'Unless we are prepared to share bread with our grief- and disaster-stricken brethren, we should not expect others to help us.'

Zardari probably did not expect the generally negative reaction to his proposal. But as Quaid-e-Azam University physics professor Pervez Hoodbhoy explains, 'Because documentation exists, the salaried class is the only segment of society that actually pays taxes. To milk it further will produce much resentment.'

'Ad-hoc taxation is bad and reflects poorly on successive governments,' adds fellow academic Q Isa Daudpota, who suggests that perhaps the government should stop buying military aircraft instead.

There are even those like Najma Sadeque, a non-government organisation worker, who says, 'All big tax evaders starting from Zardari and Gilani and guilty parliamentarians and ministers, and all tax evaders (should be placed) under house arrest until they cough up overdue taxes!' Sadeque says that if they all just pay up, there would be no need for a flood tax.

Still, there have been more sober counterproposals from even those who are critical of both the Pakistani government and the tax system.

Badar Alam, editor of the current-affairs monthly ‘Herald’, says, 'A one-time flood tax should be imposed on conspicuous consumption.' He suggests that something like a one-percent sales tax be imposed only on 'high spenders' for one-time shopping or dining that exceeds 10,000 rupees (117 dollars).

Hoodbhoy, for his part, proposes 'a flat one-time tax on urban property and agricultural lands at one percent of the current market price'.

Yet, he also believes the current furore over the elite’s supposed non-payment of proper taxes is all sound and fury that will eventually die down.

'Apart from the exception created by the lawyers’ movement, the common man has come out on the streets only when blasphemy is alleged, or when some religious or anti- West issue gains prominence,' observes Hoodbhoy. 'The absence of a progressive national movement for economic and social justice means that tax thieves, feudals, and other enemies of Pakistan’s people will get away this time as well.'

© Inter Press Service (2010) — All Rights Reserved. Original source: Inter Press Service

Where next?

Advertisement