Friday, 26 November 2010

Eat, pray, tax

November 24, 2010 — koolblue
By Hassaan Ghazali | Published: November 24, 2010

The observance of Eid this past week gave one a rare glimpse into the plight of citizens and how similar our fate is to that of livestock at slaughtering time. And with the debate on Reformed General Sales Tax and Flood Tax gaining momentum in the legislative arena, our similarities become more striking still. As a bleating nation waits on the altar, one cannot help but wonder whether this sacrifice is even necessary, and what we may expect from our ‘kasais’. We would be lucky to get a swift dispatch to the hereafter however the track record of this government would suggest that a blunt knife lies in store for us. We may as well cue the bleating.

The revelation that only 1.6 per cent of 160 million Pakistanis are registered taxpayers is a poignant reminder to us that the federal government’s tax administration system has failed to deliver. If you are one of approximately three million lucky bearers of the National Tax Number card, you would do well to enjoy the warm paternal feeling that normally arises when one has responsibility for others. However, the current macro-economic framework of Pakistan is anything but normal and so the warmth, however short lived, will not ease the chills going down your spine if the taxman should come knocking this winter.

Although there are many good things the government could do for responsible taxpayers that sustain the economy, it appears few alternatives have been considered. Perhaps declaring them as a special minority, or honouring them when the Presidency next dishes out civil awards would generate much needed attention because presently the government seems to be more interested in cooking up new taxation schemes and less concerned about getting more taxpayers enrolled in this exclusive club. Perhaps the fiscal crisis provides stakeholders with the context for introspection and the opportunity to coalesce around an issue before it is too late. Already, the tax proposals have earned the ire of trade associations, politicians, civil society and the media. With whisperings of revolt across the country, perhaps our decision makers need to address the inequities prevalent in society before they decide to pick our pockets.

In all fairness, one does not require statistics to witness the grave injustices meted out to taxpayers. A merry stroll through any of our human settlements presents ample evidence of the real problems we have to contend with and how intrinsically linked our lives are to the rule of law, or lack thereof. In a country which rewards informality by according the poor with the same privileges enjoyed by the rich, it comes as no surprise that the taxpayers are the only ones who do not have immunity from the law.

Notwithstanding the fact that no less than thirty seven government agencies levy more than seventy separate taxes on various goods and services, only one out of every sixty eight Pakistanis is formally recognized as a taxpayer. These lonely souls would love some company alas the poor have nothing for tax to be levied upon and the affluent ones sitting in Parliament have done a good job of exploiting the corruption which is endemic in our tax administration system. As long as the hammer falls squarely on those that enjoy neither squalor nor luxury, it is unfortunate that the government would insist on placing an additional burden on our shoulders.

Given that the rhetoric and political discourse has yet to offer up firm proposals for reform of the tax administration system, measures designed to break our backs will continue to face considerable resistance from all quarters. Before new fiscal measures are proposed to milk the masses, it may help citizens to hear the government first announce drastic austerity measures for the public sector along with a plan that ensures good housekeeping by the tax authorities. Anything else would lead to a vicious cycle where taxpayers giving an inch of rope find that a benign government suddenly becomes a lasso wielding cowboy.

Before we get wrangled into the tax corral, we must accept that proclivities of the present administration suggest that tax reform is next to impossible in Pakistan. It would seem that the only way to usher in a golden age for citizens is to take control of our own destiny and reject the entrustment of our affairs to inept landowners, industrialists and rent-seekers sitting in Parliament. Perhaps that way we can stop big government from bleeding us dry and will help set the stage for a concerted effort at tax administration reform. Until the government can convince us that it has atoned for past sins and is fixing itself, any new tax will be shot down faster than you can say Baaaaaa!

The writer is a consultant on public policy.

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