The lawmakers have to rise above their class interest
Hafeez Sheikh maintains that tax collection has more than doubled during the five years of the present government. This would sound unconvincing to Sir Malcolm Bruce, Chairman of the Commons International Development Committee who told the committee, “They (government leaders in Pakistan) are taking our taxes, not paying their own taxes. There are billions of pounds they have got in bank accounts yet they are taking money from the IMF.” There is a point in what Sir Malcom says.
Pakistan has one of the lowest tax-to-GDP ratios. Compared to an average of 20 percent in other developing countries and 30-40 percent in developed countries, Pakistan is in the bottom ranked nations in terms of the proportion of population registered as taxpayers which is less than five percent of household population. There is rampant tax evasion, partly with the collusion of the official machinery. Whereas 3.1 million people have the National Tax Number, a mere 1.2 million filed an income tax return in 2010/11. Of the 47,800 companies that have NTNs, less than 16,800 filed income tax returns. Besides tax evasion there is the equally worrisome phenomenon of tax reprieve enjoyed by powerful lobbies. The agriculturists with large land holdings have a strong presence in parliament and provincial assemblies and are not willing to tax agricultural incomes. Agriculture has a share of 22.5 percent in GDP, while its contribution towards revenue collection is only half percent. The big business lobby stands in the way of the documentation of economy. The GST could not be extended to wholesale trade and services due to strong resistance from the trading community. The banking sector made huge profits during the last decade while the tax rate for the banking companies were brought down from 50 percent in 2002 to 35 percent in 2007. The services sector has a share of 54 percent in GDP, while its share in tax revenue is 28.4 percent.
Hafeez Sheikh concedes that while the NFC Award has led to the transfer of Rs five trillion to provinces, they have raised their expenses by 21 percent. Provincial governments avoid raising taxes for fear of unpopularity. Despite financial constraints the federal government persists in providing untargeted subsidies which benefit the privileged more than the needy. It is ironical that while the government suffers from financial crunch it is actively pursuing the case for the creation of a new province.
The political elite needs to realise that democracy without a sense of responsibility cannot be sustained for long. The lawmakers have to rise above their class interest. The politicians have to educate the masses that it is necessary to make sacrifices today for a better tomorrow. Unless they themselves pay taxes, they cannot persuade others to do so.
