Bailing out Radio Pakistan

The annual wage bill of Radio Pakistan is double the total volume of advertising revenue - the only way out.is tax.

In his letter to the editor of The Express Tribune on February 28, Radio Pakistan Director General Murtaza Solangi defended the proposed tax of 2% on mobile phone users on every recharge to make public radio financially stable. If the additional tax was unacceptable, Solangi said, people should come up with counter-proposals for Radio Pakistan to stay afloat.

Solangi says:

"At the end of the day, the choice is either to have a public broadcaster — as the rest of the world does — or shut it down. If it needs to be retained, then people need to tell us how."

First off, the reasoning implied in his letter that all over the world public radio is heavily subsidised by the state is questionable. Moreover, the fact that the annual wage bill of Radio Pakistan is double the total volume of radio advertising revenue should prompt immediate belt-tightening at the national institution.

In any case, resorting to indirect taxation when the tax-to-GDP ratio in Pakistan is already below 9% is simply unjust. Instead of punishing phone users, who’re already subject to various indirect taxes, shouldn’t the untaxed sections of the economy be brought under the tax net to generate more revenues?  Take the example of the retail sector. According to former finance minister Shaukat Tarin, retailers across the country pay taxes amounting to roughly Rs125 million annually, of which Rs50 million are paid by the Canteen Stores Department. This figure is shockingly low because the size of the retail sector in Pakistan is estimated to be $42 billion.

One of the many reasons for the government’s dismal tax collection from the retail sector is that it mainly consists of small players. Income tax can’t obviously be collected from small retailers. To capitalise on the large and thriving retail sector, the government should expedite the process of bringing global retail giants like Walmart to Pakistan.

Even if large retailers were to take only one-tenth of Pakistan’s retail sector, it would generate tax revenues of well over $1.4 billion a year. Compare it to the current annual figure of Rs125 million, and we know why direct taxation and big corporations are key to effective tax collection.

With its passionate request for government help, Radio Pakistan has joined loss-making, state-owned organisations like PIA and Pakistan Steel Mills, which are already costing the national exchequer roughly Rs400 billion annually.

A national asset becomes a liability when it seeks a bailout at the expense of taxpayers.

 

Read more by Kazim here.