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‘Naya Pakistan’ will be a far cry if tax collection remains abysmally low

COLUMN-ENG-08-10-2020

One of the major problems in Pakistan is that the amount of revenue collected does not match either the adult population count that can pay taxes and/or the needs of both those who can pay taxes and those who cannot. 

State institutions are still weak, uncoordinated and often standing in each other’s way, with the administrative staff not qualified to run an institution on modern lines. 

Knowledge about how a modern state system should work and how the Pakistani state is working, is a basic precondition for all to be able to identify themselves with the state and its institutions; to develop responsibility for their wellbeing and to be able and ready to contribute to it. The education and training received in our schools and other educational institutions do not qualify Pakistanis to become good citizens.

The primary obligation of each citizen to the state includes contributing to the GDP by work or business; paying taxes according to the income; by making non-material contributions like giving ideas, or helping to improve the environment for example. 

That paying taxes is one of the basic obligations in a modern state has not been explained and implemented sufficiently in Pakistan. Most people in the world don’t like to pay taxes because it means surrendering a part of the money which they have earned by working hard. There are legal and illegal ways to avoid or minimize taxes in all countries including Pakistan, but it must be recognized that paying taxes is a necessity for general well-being. .

Consecutive World Bank teams trying to put Pakistan’s economy right have complained that Pakistan is not collecting enough taxes. And that is not because the economy is very bad or the GDP is very low, but because those who would be the main tax payers are not paying their dues and the state is not organized enough to go after tax evaders. Most of the tax evasion is due to blatant and rampant corruption by the tax collection entities. This is made possible by complicated tax regimes that are beyond common understanding. The tax department is ill organized, its staff are neither trained nor equipped to manage taxing a population of over 200 million. What is needed is a computerized tax payer’s register and an efficient handling of incoming tax declarations of citizens as well as tough prosecution of tax offenders.

Everybody looks to the state and its institutions for health care, education, cleanliness, jobs, road construction, defence and many other things. But how is a state supposed to finance all that? The deficit over the years, because of poor tax collection, has been covered by borrowing money in the international market. That is major reason for the high amount of debt Pakistan has accumulated. Debt servicing is damaging the economy. 

Taxation is the lifeblood of an effective, modern state without which none of the other functions of the state would be possible. Because taxation is one of the ways in which individuals relate to the government, it helps us define the meaning of citizenship. Taxation institutionalizes the concept of a social contract between the state and its citizens, between the sovereign and its subjects.

To foster economic growth and development, all governments need sustainable sources of funding. Programs providing health, education, infrastructure and other services are important to achieve the common goal of a prosperous, functional and orderly society. Revenues not only pay for public goods and services; they are also a key ingredient in the social contract between citizens and the state, helping define the social and cultural meaning of citizenship. The process of paying taxes helps forge civic identity; it validates the financial responsibilities of being part of a broader political and social community. It signifies who is a member of such a community, or how wide we draw the circle of “we”.

A central element in the formation of a nation is that all its members should be equal, equal not only economically, but as members of the nation beyond religious, ethnic and other differences. All contribute to the common wellbeing according to their means. And there is a solidarity between all members of the nation which includes material, financial and emotional support in times of need.

The Pakistani nation is weakened by religious, ethnic and other exclusiveness. This is caused by a lack of understanding of the idea of a nation and the solidarity needed between citizens and the state. Well-to do citizens have to recognize that wealth creates social obligations towards the less fortunate citizens and towards the state. It is meant to promote the common good. 

Incidentally, this is also one of the prime messages of Islam. Even poor citizens have to be aware that they have an obligation towards the state and the other members of society and each one has to contribute something. That is the obligation of education. In a Muslim country Islam should be able to help that understanding. 

The current political system of parliamentary democracy in its beginnings had a slogan: no taxation without representation. No taxation without representation is a political slogan originating in the 1700's which was one of 27 grievances of the American colonists in the “Thirteen Colonies” and became one of the prime causes of the American Revolution. Many in those colonies believed that, as they were not directly represented in the distant British Parliament, any laws it passed affecting the colonists (such as the Sugar Act and the Stamp Act) were illegal under the Bill of Rights of 1689, and were a denial of their rights as Englishmen. This slogan is almost forgotten today. 

Representation means formal representation in parliament or in an elected body. People who are aiming for such a position have to be extra careful about fulfilling their obligations as citizens. And there has to be a fool-proof system to check it before one is chosen for an elected post. Wealth should be estimated honestly with no hidden accounts or properties. And it should include laying open the financial assets of the wife and grown-up children as well. In all these respects, Pakistan has to go a long way. There is no short cut to ‘Naya Pakistan’.

(The writer is a defence and security analyst).