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Tuesday, May 21, 2024

The misuse of taxation in Pakistan

Bureaucracy continues to be a major hurdle in our progress as such its wings have to be clipped not strengthened for the nation to fly and reach heights. To balance the budget there should be massive cuts in salaries and perks of the non-performing state apparatus together with the use of indigenous fuel and focus on growing edible oil seeds.

Taxation to the public to pay back the loans consumed by the elite; has been the approach in preparing budgets since the ‘Debt Trap’ was laid in October 1958. Various terms like; ‘Awam Dost’, and ‘Tax-Free’ are used to bluff the public. Budgets are then followed by ‘Mini Budgets’ to further burden the masses and then the stampede to get rid of the unspent public money before the June 30 deadline. It’s a total financial mess out there that continues unabated.

The 15% rise in the salaries of the non-performing and tormenting bureaucracy is mind-boggling. Who came up with this idea of rewarding those who should have been punished? Where are we heading? It is a scenario of ‘Blind leading the blind’ heading towards total darkness till the lights are shut off due to the unavailability of imported fuel. Even the 175 billion tons of ‘Black Gold’ at Thar cannot bail us out. Imported coal/gas/oil who is skimming the kickbacks?

Read more: How would new real estate taxation impact prices & stock market returns?

It is time to revisit our game plan before IMF puts us out of business

The Americans revolted against the British Empire because of the unreasonable taxes collected by the colonists, the principle contested was; “No taxation without representation”. They refused to pay taxes unless they had a say in their collection and utilization. The American war of Independence has fought over two centuries ago, we the people of the Islamic Republic of Pakistan (IRP) are being taxed in the 21st century by a legislature that lacks both representation and legitimacy.

An unrepresentative regime wants to share the goodies with the help of the ‘Baboos’ so 15% raise in salary has been granted to those who serve only personal and vested interests. There is an American saying that appropriately describes this exploitative relationship; “You rub my back; I will rub yours”. This back rubbing must stop for the nation to move forward.

In the year 2000, I assembled a team of professionals to prepare a Shadow Budget from the platform of the Lahore Chamber of Commerce and Industry (LCCI). We followed the age-old principle of budget formulation in which the earnings and the expenses had to be matched. Once we started to study the expenses in the previous year it was an eye-opener. Many organizations were drawing their expenses from the budget while keeping their profits. Human development (Education, Health) had the lowest priority. After resetting our priorities, we were able to produce a balanced budget which was then published together with the official document.

After the budget speech of Dr. Miftah Ismail whom I consider to be the ablest mind in his party, the Chairman of FBR (Federal Board of Revenue) had a press conference. He gave details of his efforts to raise Rs 440 billion in new taxes. Despite the fact that less than 1% pay income tax in the land of the pure, FBR is hoping to collect all these taxes this year. The three main expense items in our budget are; debt servicing, defense expenditure and running the state machinery.

Read more: EAG calls for ‘Fair and Just Taxation’

Except for the security of the country, the rest are a total drain on the economy

Debt is a curse from which there seems to be no escape while the state institutions are non-functional and a total burden on the people of the republic. I read an interesting message in which a suggestion had been floated that IMF should be requested to freeze all their loans and open an account for the direct repayment. The people of Pakistan should directly pay into this account instead of going through the gluttonous state apparatus that continues to consume and is grossly inefficient.

Instead of productive output, the economy of the republic is based on loans followed by loot. There is the influx of easy money which then raises the standard of living of the people and loot becomes a way of life. Money must be earnt before it is spent. Only in very large projects some short-term debt makes sense but with a clear road map to pay it back. Debt with no payback mechanism is death both for the nation and the individuals who spend borrowed money as if there is no payback. Imports are a big menace where a lot of borrowed money goes into buying items of luxury. I remember when I took charge as Chairman Pakistan Science Foundation in 2002, I reviewed the import bill of the country.

An unbearable inflation

Fuel at Rs150 billion was the highest followed by edible oil at Rs 50 billion followed by tea at Rs 20 billion. To reduce the import, bill a plan was prepared to start mining at Thar, for Oil Seeds a detailed proposal was prepared to develop farms in the Cholistan with the application of Solar Technologies for pumping and distillation of water. For tea plantation area was identified in Azad Kashmir and Swat.

For marketing of Green Tea, a plant was installed at National Tea Research Institute at Shinkiari. At 175 billion tons, Thar Coal is the energy future of Pakistan that can meet our fuel needs with the application of appropriate environmentally friendly technologies. Edible Oil and Tea Bill can also be reduced by establishing plantations in undeveloped marginal lands.

Read more: India’s flawed taxation system

Loans and loot are a recipe for disaster. It is an IMF-laid trap from which no nation has been able to come out. Nations are built on the foundations of self-reliance and productivity for which facilitation not exhortation can make a difference. Bureaucracy continues to be a major hurdle in our progress as such its wings have to be clipped not strengthened for the nation to fly and reach heights. To balance the budget there should be massive cuts in salaries and perks of the non-performing state apparatus together with the use of indigenous fuel and focus on growing edible oil seeds. There should be no taxation without effective representation.

 

The writer is Ex-Chairman Pakistan Science Foundation. He can be reached at fmaliks@hotmail.com. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.