Home Opinion Op-Ed Taxing the taxed – Farid A Malik

Taxing the taxed – Farid A Malik

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Farid A Malik |

Pakistan has run out of cash. The state is bankrupt which is bad news, but the good news is that Donald Trump the President of the lone superpower of the world had declared bankruptcy four times. In the capitalist world, it happens all the time. If you are unable to pay you have to protect yourself from the sharks to survive, re-organize and then re-emerge from the debris like a phoenix rises from the ashes.

Unfortunately, it is Phoenix time for Pakistan. The vultures are hovering over us and we are offering the half-dead population to them while protecting the rich and the powerful. Taxing the already taxed is like beating a dead horse to gallop which he never will. Yes, the country needs to raise cash.

Pakistan has one of the fastest growing informal sectors in Asia and slowest formal sector. That is why the people have wealth while the government does not.

Austerity measures are needed but at the same time wealth has to be generated and the existing assets protected. Dr. Kamal Monnoo the economist has suggested focusing on experts. To attract foreign investments, the government should never show panic; instead, it should have plans to move forward.

From day one only one percent of Pakistanis pay income tax, now it has dropped even below that. Successive governments have failed to expand the tax net. First, the department was called Income Tax then Central Board of Revenue (CBR) and then a chartered Account from the private sector took over he named it Federal Board of Revenue (FBR). There was no improvement in performance, the collection remained dismal.

Read more: Government gearing up to approve sweeping reforms in FBR

It was during the term of the plastic Prime Minister of Pakistan Shaukat Aziz that the system of indirect taxation was introduced. Tax everything from soap to fuel as everyone depends on them to survive was his approach. Only air that we breathe is not taxed but its quality had deteriorated to an extent that people may need to make private arrangements to protect their lungs.

On per capita basis Pakistan is one of the highest charity paying nations of the world. The big question is when they are willing to chip in for the welfare of the society why don’t they trust their own government? Kaptaan raised this question in his electoral speeches and then provided the proof by refusing to move in the palatial PM House but the crusade ended here. Now the same flawed approach is being applied to tax the already taxed.

The approach of taxing the taxed has never worked in the past and it is doomed to failure in the future.

The downtrodden masses of the country were expecting a break from the Kaptaan in the form of price freeze not increase. Pakistan is now coming out of the corruption-riddled loot and plunder era of Sharif and Zardari. Transitions have to be carefully planned. Both the previous governments relied on borrowing.

The borrowed money was then squandered through massive infrastructure projects like the ‘Orange Train’. While big money went to them, they looked the other way on encroachments through which the poor man survived.

While the big fish are being netted the small are being penalized. It is true that there is no money left to make interest payments as it has been misspent and has failed to generate revenue to pay back.

Read more: FBR’s irrational taxation regime only has one motivation: extraction?

Like President Donald Trump the Government of Pakistan should declare bankruptcy and request for time to reorganize its finances, till that time there should be a freeze on prices. The poor and barely surviving cannot fail out the corruption of the previous rulers.

The revenue collection approach of the government is seriously flawed. There is a serious trust deficit; people pay bribes to keep out of the system. Pakistan has one of the fastest growing informal sectors in Asia and slowest formal sector. That is why the people have wealth while the government does not.

Time is running out, a major change of course and direction is needed before it is too late.

There is no national agenda, everyone is for himself. Taxpayers do not pay as their earned money is mis-spent while the collectors do not collect for the state, their interest is to sell their own bank accounts. For the nation, it is a lose-lose situation.

Out of box approaches have to be tried. People trust their kaptaan but not the people who surround him. While the focus should be on revenue generation on one hand but at the same time relief should be delivered to the toiling and barely surviving masses on the other. Unfortunately, the elected government is moving in the wrong direction.

Read more: We filers are idiots? – Ikram Sehgal

Liaquat Ali Khan the Nawabzada made a pledge that he would not own a house till he could ensure that every Pakistani had one. Though Zulfiqar Ali Bhutto (ZAB) could not deliver on his promise of ‘Roti, Kapra aur Makan’ but people still believe that he tried.

While Sharif’s PML-N is totally out of the corridors of power, Bhutto’s PPP still rules Sindh through an able and educated Chief Minister much superior to others. The approach of taxing the taxed has never worked in the past and it is doomed to failure in the future. Time is running out, a major change of course and direction is needed before it is too late.

Dr. Farid A. Malik is Ex-Chairman, Pakistan Science Foundation. The article was first published in The Nation and has been republished here with the author’s permission. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.


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