Capital suggestion Of the 193 member states of the UN Pakistan is the only country whose leaders call their own countrymen ‘tax thieves’. Here is a list of countries where tax revenue as percentage of GDP is actually lower than it is in Pakistan: Iran, Bangladesh, Afghanistan, Algeria, Angola, Bahrain, Burma, Cambodia, Chad, Congo, Guinea, Gabon, Haiti, Kuwait, Libya, Nigeria, Oman, Qatar, Saudi Arabia, Sudan, UAE and Yemen. The government of Pakistan is the only government on the face of the planet that cries out loud in front of the IMF, the World Bank, the EU and the Americans that ‘Pakistanis don’t pay taxes’. Here’s the truth: as per the Pakistan Census Organisation, Pakistan’s estimated population as of November 5 stood at 184 million; 96 million males, 88 million females. According to the Human Development Index (HDI), 60 percent of Pakistan’s population makes $2 a day or less; that’s 110 million Pakistanis. Surely, no one expects Pakistanis living at or below poverty to be paying income tax. Of the 74 million who are not below the line of poverty, 47 percent are women where labour force participation is at 22.4 percent. For the record, 84 million Pakistanis are 19 years of age or under, and an additional 11 million are 60 years of age or over. That’s a dependent population of 95 million. Naturally, the dependent population has little or no income and thus no income tax (in the west, the state actually pays a whole array of allowances and stipends to its dependent population). According to the Labour Force Survey (LFS) 2012-13, employment by sector stands at agriculture 44.3 percent, services 34 percent and industry 21.7 percent. Under the law, agriculture and services are under provincial domains. In that sense, the FBR is already doing a fine job. What we are left with is around a million Pakistanis who have the financial capacity-and are legally obligated-to pay income tax. Admittedly, there are perhaps a few thousand big sharks that ought to be paying a lot more in taxes than they currently are. Admittedly, the FBR can extract a few billion rupees in additional taxation but that in the national scheme of things is neither here nor there. Are we spending too much on defence? I have counted at least fifty countries that spend a higher percentage of their GDP on defence. They include: India, Egypt, Sri Lanka, the United States, the United Kingdom, South Korea, France, Eritrea, Oman, Saudi Arabia, Israel, Jordan, Liberia, Brunei, Syria, Kuwait, Yemen, Angola, Singapore, Greece, Iran, Bahrain, Djibouti, Morocco, Chile, Lebanon, Russia, Colombia, Zimbabwe, Turkey, Georgia, Guinea-Bissau, Ethiopia, Namibia, Guinea, Turkmenistan, Kyrgyzstan, Algeria, Serbia and Montenegro, Armenia, Botswana, Ukraine, Uganda, Ecuador, Bulgaria, Lesotho and Sudan. For the record, our defence budget in the 90s used to be 3.6 percent of the GDP. Since then there has been a steady decline. The most recent allocation for defence is around 2.5 percent of the GDP – a 33 percent decline over a decade. Raising additional taxation will remain a slogan because no one can suck blood from stones. What is fundamentally wrong with the state of Pakistan is that the government spends – or loses – too much. Some 200 state-owned enterprises (SOEs) end up losing Rs500 billion a year, every year. The Cabinet Division ends up spending Rs35 million a day, every day. The Establishment Division ends up spending Rs10 million a day, every day. We need to begin with loss minimisation, and then expenditure control and then if need be look into raising revenues.
Posted on: Sun, 10 Nov 2013 19:12:15 +0000
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