ALL over the world, people pay taxes because of fear and enforcement of the writ of state to ensure that every citizen pays his due share. The very basis of the foundation of a state is based on its capability to collect taxes, to fund various constitutional pillars of the state and essential services like security, judiciary, law enforcement, welfare, development and investment in education, health etc. Tax evasion is a serious crime and conspiracy against the state. A state that fails to collect direct taxes is bound to face an existential threat to its very existence.
Unfortunately, in Pakistan, every successive government at the helm of affairs since 1954 has been involved in institutionalized tax evasion because of the conflicts of interests of ruling elite and powerful state institutions. The concept of creating foundations, beneficiary of tax relief and subsidies was solely for specific welfare projects of the most deprived sections of society. However, when such foundations get involved in commercial projects and creating cartels, they morally and legally lose the benefit of tax rebates.
The biggest threat to Pakistan’s national security and state sovereignty is the unstable economy, which since December 1958, has been relying on IMF Standby Agreements, followed thereafter by 22 such bailout packages. Unchecked smuggling of essential basic food items, across our secured border check posts, has become a norm, with mere lip service by those tasked to prevent such crimes. As long as Black Economy thrives the Documented Economy will suffer and Pakistan will continue suffering. Repetitive IMF packages should have been used to build essential infrastructure required to boost export and employment generating industries.
In the 80’s Phillip launched an electronics component plant in Lahore, but it closed down because of bureaucratic red tapism hurdles and failure of the administration to enforce rule of law. The foreign investors shifted the plant to South India and it became the launching pad for growth in technology and research. Today India earns almost $100Billion in this field only. India adopted its Constitution by 1950, became a democracy, adopted austerity as a state policy and embarked on development of human resources building Indian Institute of Technology and they now reap the benefits. Pakistan needs to restructure its economy on a war footing.
In Pakistan it seems that what Leona Helmslay, wife of a high profile real estate tycoon in Manhattan NYC, stated that only fools pay taxes, holds true. Leona Helmslay, an American billionaire, was imprisoned to serve as deterrence for others. The lady was punished although her husband was willing to pay hundreds of millions of dollars, if the state was willing to let her go unpunished. The state not only recovered all unpaid taxes but also punished and subjected her to public rebuke by exposing her identity. In sharp contrast our FBR is protecting the identity of 4,000 companies that have claimed fake refunds, while several lakhs have managed to escape the tax net.
The biggest Land Mafia tycoon of Pakistan publicly states on national television that he “puts wheels on files” and nobody dared to challenge him. Even the judiciary regularized his illegal takeover of thousands of acres of state, forest and private land on the basis of “Third Party Interest” in Sindh, totally oblivious of the sufferings of the poor. Thousands of trees were chopped down. The abuse continues, irrespective of who governs – a dictator or civil government. In the rare case where the Land Mafia tycoon is censured in London and BP190 million recovered from him as proceeds of crime by NCA of the UK, the amount is handed back to him by a populist PM, to be adjusted against Rs 460 billion he voluntarily offered to pay back with the consent of SCP for another crime committed.
Tax evasion is a white-collar crime, which can only be committed with connivance of revenue collectors, expert professional accountants and tax counsellors. The whole state system collapses if the rich do not pay taxes. Even the MD IMF had to state that Pakistan’s rich must pay taxes and subsidies should only be for the poor. No state or system can survive without the welfare of the most deprived sections of society. It is the state which has to enforce the culture of taxpaying by giving exemplary punishment to high profile tax evaders and the tax collectors who help them facilitate in such anti-state activities. There is no rocket science involved in documenting the economy, all that is required is political will and some level of integrity.
—The writer is contributing columnist, based in Lahore.
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