Budget, IMF & subjugation - II

Noted economist, Arshad Zaman, in his brilliant piece, The roots of our budget crises, rightly pointed out:
The root cause of the perennial crisis of public finance in Pakistan is as easy to understand as it is difficult to correct. The crisis does not arise, as many would have us believe, because some this-to-that ratio is much less than in another country. This is just arithmetic.
The crisis is largely due to three intractable facts. First, that tax collectors systematically punish the rare honest tax-filer to extort bribes, and are so well-connected politically that top officials are unable to stop them. Second, that the rich lend to government but don't pay taxes (nor return loans); with the result that government spends more on interest payments to rich citizens (in 2017-18, Rs 1,320 billion, or thirty of every hundred rupees collected in taxes) than it does on defence (Rs 1,030 billion) or development (Rs 790 billion). Finally, the proliferation of exemptions, especially the exemption of landlords from federal income tax, renders direct taxation toothless.
Since the successive governments have failed to generate required resources by taxing the rich and accelerate economic growth, neither fiscal deficit is receded nor has the goal of poverty alleviation been achieved. It is an admitted fact that about 3.5 million ultra-rich are not paying income tax according to their real incomes-total number of individuals showing income exceeding 10 million rupees is less than five thousand for the last many years. The members of militro-judicial-civil complex-the real rulers of Pakistan-get tax-free perks and perquisites, billions are expended on them from taxpayers' money and then we say our tax-to-GDP ratio is one of the lowest in the world. Over 75% taxes collected are indirect, many even under the garb of income tax in the form of presumptive and minimum taxes pushing millions to below the poverty line every year.
The Executive (in our context, government run by bureaucrats) have managed to secure and retain the powers to vary tax rates or grant exemptions/waivers through SROs, conveniently bypassing laws passed by the Parliament. It is blatant violation of Articles 77 and 162. The tax agencies at federal and provincial levels, paid to collect taxes as per law, are themselves the root cause of massive tax leakages. During Dar's era, on our recommendation, the IMF asked the government to surrender sub-legislative powers of issuing SROs. Ishaq Dar and the mighty business lobby frustrated it knowing that this would end their crucial financial lifeline. The government of PML-N skilfully protected non-compliance of payment of tax by super-rich by just imposing on them "extra" (sic) withholding tax as non-filers! The vistas of tax evasion and non-compliance were, thus, kept open. The most glaring example: many business houses collect sales tax from people but with the connivance of tax officials deposit only a fraction of it in the government treasury. In this way, they get illegally enriched as well as avoid disclosure of real incomes.
Unfortunately, PTI has not bothered to change the culture of tax evasion, loot and plunder promoted and protected by its predecessors. In the budget 2019-20, the only focus is how to achieve the target of Rs, 5,500 billion agreed with IMF and not to concentrate simplifying tax system, lowering tax rates for investment and rapid growth, improving climate for investment, facilitating new business initiatives, providing affordable finance to all, especially the young educated entrepreneurs, and above all reforming all state institutions, simplifying laws and regulations and ensuring their publication in Urdu as well. We need sustainable growth of at least 7% to provide jobs to two million young people every year. Policies should be made to achieve this target. Tax being byproduct of growth will increase accordingly. Reduce the taxes, make them simple and let the investments and businesses grow.
The existing tax system and policies are reminiscent of the British period when the East India Company's henchmen would go to the peasant abodes and snatch away most of their produce. According to many historians, the East Indian Company's tax collectors used to take away one half to two-thirds of the crops and, therefore, the peasant's life was highly miserable during the colonial period. Our successive governments by taxing the poor and exempting the rich have been doing the same injustice. Will the new Chairman of Federal Board of Revenue (FBR) end these malpractices?
It is time to recall the history for Syed Shabbar Zaidi. The East India Company destroyed the indigenous industry of the Subcontinent to promote products of the Queen's England. In the same manner, successive governments have been destroying local industries by making raw material costly through exorbitant taxes and promoting imports of finished goods, creating shortages of electricity and gas and then increasing their prices, and blocking refunds worth billions of rupees due to exporters. These policies were deliberately adopted by Shaukat Aziz, Hafeez Shaikh, Ishaq Dar. These were aimed at crippling our local industry in general and export industry in particular on the behest of Neo-colonialist master, IMF and others. They wanted and still want to capture huge consumer markets of populous countries like Pakistan, India and Central Asia. This can only be done if the indigenous industries of such countries are either destroyed/crippled or by paving the way to monopolies of multinationals, which actually fund and influence the policies of the United States and Western governments.
There are remarkable similarities in the operations of the IMF in Pakistan and those of East India Company and their crony rulers during the colonial era. Political and economic control is exerted through an oppressive, inequitable, tyrannical, unjust, and anti-people tax system in which the sufferers are the downtrodden people of Pakistan while the beneficiaries are the rich and mighty.
The sovereignty of a state is measured by the power it enjoys in imposing taxes on its people-responsible governments utilise revenues for the benefits of the less privileged and for the welfare of citizens. On the contrary, our inept rulers are utilising the same for their luxuries including foreign trips, even umrahs on taxpayers' expense. They are destroying local industries and opening their markets to foreign goods-look at the free and abundant availability of imported and smuggled goods everywhere. This has paralyzed our local manufacturers. One wonders how ruthlessly the so-called people's representatives have been destroying Pakistan. Obviously they want perpetuation of their own rule and they know that this can only be done if they unquestionably follow the command of lenders and donors who only look for their benefits. The era of physical subjugationn is over. It is now the era of economic subjugation.
The ruling elites in Pakistan represent a club of tax dodgers and plunderers of the national wealth. If we are being maltreated by the US and the IMF or others, it is because of our ruling elites that opted not to pay taxes at the expense of national sovereignty. We have no right to accuse the US, the IMF and others for this. We have long been moving towards self-destruction.
Experts say that taxation and other proposals presented on June 11, 2019 will bring more miseries for the poor segments of society and further debt enslavement for the State. There is no plan to collect taxes to the tune of Rs 8,000 billion, which is the actual tax potential of Pakistan. They want to fix tax target at Rs 5,500 billion and for that more oppressive taxes would be levied but no taxation on the rich people, rather generous money whitening schemes for them. The agenda is clear: allow the rich to amass wealth, keep the country under debt subjugation and deny the masses their legitimate economic and other fundamental rights. The government of PTI claims it will prove otherwise and take revolutionary measures to reverse the earlier policies. As of today, people have been bulldozed under rising prices of items of daily use. The rich and exploiters are minting more money taking benefit of the situation. Tax dodgers are enjoying the benefits of Assets Declaration Ordinance, 2019 telling the honest taxpayers that they are fools and idiots for being loyal citizens of this country!
(The writers, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences. The views expressed in this article are not necessarily those of the newspaper)