Shaukat Tarin oversaw Pakistan's finance, economic, revenue and planning affairs from October 2008 till February 2010. During his tenure as Finance Minister, he is widely credited for bringing Pakistan from the brink of default. One of his noteworthy achievements was the successful consensus on the 7th National Finance Commission Award after 19 years.
A business graduate, Tarin started his career with Citibank Pakistan in 1975, and worked there for almost twenty-two years. In 1997, when the government introduced banking reforms in Pakistan, Mr Tarin was appointed as the Chairman and President of one of the country's largest nationalised banks, Habib Bank. He was awarded Sitara e Imtiaz on March 23, 2007 for his contribution to public service. Tarin currently serves as Director on the BOD, Silkbank Limited.
"There is a severe trust deficit between the provinces and federal government," says former federal finance minister and Silkbank honcho, Shaukat Tarin. Speaking exclusively to BR Research, Tarin defended the government's decision for not making revenue targets a condition for enhanced disbursements to provinces under the 7th NFC Award. He explained that "the state has treated the provinces so badly for so long that there was a total lack of trust towards the federation during the deliberations over the award".
The 7th NFC Award was signed into law by the President in March last year, after weeks of deliberations between representatives from the four provinces. Under the arrangement, 56 percent of the government's resources would be transferred to the provinces, while the federal government would bag the remainder. The agreement also pledges to raise the provinces' share to 57.5 percent in five years.
The "quid pro quo" in those talks was that the provinces must build capacity and increase revenue generation by one percent each year, Tarin highlights, terming the agreement a "Herculean" achievement. He asserts that if the federal government had included conditions on the higher disbursements to provinces, "they would have just walked off". But just as the "the taste of the pudding is in the eating", the true success of the award will be judged by provinces' ability to significantly improve collections from their current contribution of "less than 0.5 percent of GDP". If the tax-to-GDP ratio does not rise from the present 9-9.5 percent to about 15 percent, "we will not survive anyway," he warns.
BUILDING ENDURING CONSENSUS "The days of forming governments through coalitions between two or three 'established parties' are over; this is the era of coalition governments," Tarin contends. The veteran banker asserts that long-term prosperity can only be achieved through enduring consensus over key economic issues. "All major political parties of the country must sit together and hammer out an economic charter," emphasises the former finance minister.
The most prominent issues confronting the economy and nation today are obvious to all, he asserts, calling on all political representatives to get together and agree on a long-term strategy to combat these challenges. "I believe we can all agree that we must revamp the public sector companies, broaden the tax base, and reduce the level of inflation, unemployment and poverty and increase education and healthcare services," he points out.
"We need to focus on these five or six issues for the next 20 years for sustained results," he says adding that commitments from political parties on the matter will bring stability to policy making. He highlights that spending on healthcare, education; infrastructure and social structure needs to be increased by provincial governments.
As the stranglehold of the federal government over the resource pools gradually loosens, the onus of responsibility is also shifting towards the provinces. "They can tax capital gains on real estate; they can tax agricultural estates and incomes. They can also tax services, vehicles and property," Tarin says of the provinces.
FOR THE PEOPLE, BY THE PEOPLE "People live in provinces, they do not live in the federal territories," says Tarin. He contends that in-line with this reasoning; the process of devolution must continue till the empowerment of local governments.
He explains that more money for the provinces will translate into more money for the local bodies, adding that "the money will be spent where it belongs and people will have a strong sense of ownership". But this is easier said than done. Referring to the dilemma faced during the NFC talks, Shaukat Tarin says "just as the federal government wanted to cling on to resources; the provincial governments are also reluctant to pass them on to local bodies". Tarin advocates a two-tier approach to improving efficiency of government collections and disbursements. Firstly, the provinces should be divided further into smaller administrative units.
Secondly, local bodies should "collect their own money which they in turn spend in that constituency". He adds that local governments must comprise elected officials because "we cannot leave the administration of cities, towns and municipalities to the bureaucracy".
"You cannot elect 160 representatives to the Sindh assembly and expect them to solve problems for the residents of Mirpurkhas," he says. "The MPA can always turn around and say that he did not have the clout to divert finances to that area," says Tarin adding that "if there were an elected mayor of Mirpurkhas he would be empowered and responsible" for the same issues.
NO FREE LUNCHES Shaukat Tarin believes it is time FBR took a "heavy-handed" approach towards tax evaders in the country. "We need to make some examples by putting the big guns behind bars and imposing heavy penalties on them" he says adding that, "sending out notices will just not cut it anymore".
The crackdown against tax dodgers should be "across the board", applying to rural feudals, urban elite, political stalwarts and members of the "establishment". He asserts that such an effort, coupled with spending on development is the only way to restore the public's trust in an equitable tax regime.
"Lester Pigott, Leona Helmsley, Steffi Graf's father Peter Graf and the vice President of the United States of America; all those people were apprehended (for tax evasion) and put behind bars to send a message" he highlights. Citing a recent list of the nation's highest tax payers he said that among non-salaried tax payers, "all the big guns were missing".
"No matter the source of income, everyone must pay a uniform rate of income tax without any exceptions" says the former finance minister. Credited with the introduction of taxes on real estate and capital markets, Tarin asserts it is now time to redress agricultural taxes in the country. "The council of common interests has to figure out a way to introduce these changes, this year," he insists.
POOR, SICK ENTERPRISES "The government has no business doing business," he says while referring to the dismal state of PSEs such as Pakistan Railways, PIA and PEPCO.
While still in office, Shaukat Tarin had gotten a plan for the privatisation of 13 PSEs approved by the cabinet. However, despite the passage of 15 months, the plan lies dormant in Islamabad. "I have reached the conclusion that this approach will not work," Tarin laments. Instead, a holding company must be created which combines the five profit making PSEs with the eight loss incurring ones. The Malaysian government established the Khazana Company at the behest of their prime minister and the British took a similar approach when Margaret Thatcher attempted to sell government assets, he explains.
"Such a holding company would completely block out any interference from the ministries while ensuring accountability and transparency," adds Tarin. Although he speaks highly of the current economic team of the government, the former minister is critical of unrealistic targets for the upcoming fiscal year. Citing the much reduced target for subsidies and support to PSE he questioned, "Excuse me, have we fixed Pakistan Railways and PEPCO?"
According to him, any further delays in much-needed reform of PSEs could spell disaster for the national economy. Tarin still has faith in his successor, Dr Hafeez Sheikh and FBR chairman Salman Siddiq. But he is adamant that both men will are required to be as "stubborn" as they are "astute".
He concludes his talk by saying that the country's current economic woes are the result of the government trying to please everyone over the past 60 years. "It is time we called a spade, a spade," says Shaukat Tarin, adding up that "we simply cannot afford to lose any more money to corruption, inefficiencies and incompetence".
An interview with SHAUKAT TARIN
Interview by Ali Khizar & Mobin Nasir
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