Clinton warns Pakistan to make the rich pay

Published: September 30, 2010

Hillary Clinton says Pakistan must tax its elite if it wants to continue receiving American financial assistance. PHOTO: REUTERS

US Secretary of State Hillary Clinton on Tuesday said that Pakistan must tax its elite if it wants to continue receivingfinancial assistance, the Associated Press (AP) reported.

“This is one of my pet peeves: Countries that will not tax their elite who expect us to come in and help them serve their people are just not going to get the kind of help from us that historically they may have,” Clinton told an audience at the US Global Leadership Coalition conference.

“Pakistan cannot have a tax rate of 9 per cent of GDP when land owners and all the other elites do not pay anything or pay so little it’s laughable. And then when there’s a problem everybody expects the US and others to come in and help,” Clinton said. She noted that Pakistan’s finance minister is now presenting a package of economic and tax reforms.

Treasury Secretary Timothy Geithner said the higher bar for US aid will help the US get more for its money.

“Unless we are tougher on how we provide assistance, we should not be financing them at this level,” Geithner said.

Pakistan receives $1.5 billion annually in non-military assistance and has become one of the principal recipients of US aid. The money funds traditional development projects such as schools and clinics but is also meant to strengthen a weak government in a country vital to the US-led war in Afghanistan and its broader struggle against extremists.

Elite hamper broadening of tax net?

Finance Minister Abdul Hafeez Sheikh had previously accused the elite class of hampering the broadening of tax net, adding that they were resisting the imposition of the much-needed flood tax. Addressing members of the Senate, the finance minister said that although the economic situation was challenging, it was not as precarious as being portrayed by some segments.

Published in The Express Tribune, September 30th, 2010.

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Reader Comments (27)

  • Asim Ali
    Sep 29, 2010 - 11:07AM

    And this is the real issue of the country. For which we need the US secretary of state to tell our ruling elite to pay taxes.

    The top 5 list of what needs to happen in Pakistan
    1. Taxation of the ruling elite
    2. Fixing the compensation structure of our civil services
    3. Inviting Pakistani talent back from the West and to serve in the civil services (instead of blog writing)
    4. Create a culture of entrepreneurship
    5. Develop skills of masses such as chef, carpenters, plumbers, technicians etc. Recommend

  • Aftab A Khan
    Sep 29, 2010 - 11:27AM

    MS Clinton is 200% right Unless u Tax the heavy lords and ask others to give u aid do not Justify . Why u always ask for the Aids u must Generate from inside. In this Case i agree with Mr Sharief not to go for BEGGING . Recommend

  • Atiq Rehman
    Sep 29, 2010 - 11:43AM

    Great words Hillary.Recommend

  • Amanat ali
    Sep 29, 2010 - 11:46AM

    No doubt the elite class is enjoying tax exemption and the poor nation and the salaries person paying taxes and the rulers are enjoying security protocol, foreign trips, and making money with corruption. US should impose strict sanctions on pakistan while making funding and keep continuous watch/audit of the aid. US should make it sure that the whether the aid is spending to facilitate the nation over health, education, pure water, electricity/gas etc. This is the good step of US that directed Pakistan govt to impose tax on the elite class, feudals, industrialits, Parlimentarians etc. Recommend

  • Nasir
    Sep 29, 2010 - 11:49AM

    You seem to have good ideas. Why dont you take the first step?Recommend

  • Mahmood
    Sep 29, 2010 - 11:52AM

    While I have no qualms about revising tax brackets to suit the needs of the country, I do have serious issues with the way the present government would spend the collected taxes – I have no faith in it ending in the hands of those who really deserve it. What this country needs more of is not more taxes, but good governance and a strong judiciary. Who knows – people might actually be more willing to pay it when they see it going to the right places!Recommend

  • Sep 29, 2010 - 12:01PM

    Now that she has made the suggestion, when the government tries to impose taxes the right-wing elite will say that the state is bowing to american pressure, and the patriotic thing to do would be not to impose the tax!Recommend

  • Averroes
    Sep 29, 2010 - 12:08PM

    Now the elites have a very good excuse for not paying taxes. They can point to this statement and convince the masses that taxes are a CIA-RAW-Mossad conspiracy to destabilize Pakistan.Recommend

  • Sep 29, 2010 - 12:23PM

    Hillary Clinton is absolutely correct. If the state has the political will, it can establish its writ to tax the rich and provide relief to the poor. The state has exercised its writ in Swat, why is it hesitating to do so when it comes to taxing the rich. Unfortunately the regime lacks the political will just like Musharraf. It is the elite of this country that gets allotted expensive real estate for peanuts, is exempted from capitol gain tax, enjoys tax free exemptions and frames laws that facilitate transfer of funds abroad which amounts to money laundering. All this has been done in collaboration with FBR bureaucracy, parliament, civil and khaki bureaucracy. It is time that the rulers and parliamentarians set a democratic precedent by offering themselves for taxation. Can somebody explain how a person can be seen drving a limousine worth over Rs 1 crore or Rs50 Lakh, while he pays minimum tax. Even if the vehicle is in somebody else name, that person should be subjected to tax scrutiny. If the Finnace Minister of Pakistan is saying that he has failed to tax the rich, than both he and his PM have no business to hold these offices.Recommend

  • imran
    Sep 29, 2010 - 12:24PM

    Public should stop paying taxes till the Govt Tax the elites. Ms Cliton is more loyal to pakistani poors then its own governing class.Recommend

  • Zia
    Sep 29, 2010 - 12:54PM

    :)

    Did anyone ever thought of who decide Taxtation and its % at first place :) ? What are the “real” motives and causes?

    Then relate it with this link:

    http://tribune.com.pk/story/54883/drone-attacks-hit-all-time-high/

    Thanks,

    ZiaRecommend

  • Omar
    Sep 29, 2010 - 1:27PM

    What this country needs is a socialist revolution. Take over all that belongs to the ruling ‘elite’, lock them up in jails and distributed their wealths into the common people.Recommend

  • A Suhail
    Sep 29, 2010 - 1:37PM

    Who decides is the ruling elite? Is it the army, politicians, feudal lords or the industrialists. Hillary Clinton is a wise lady and she has uttered some wise words. She is doing what every patriotic Pakistani should have done i.e make the rich pay and open up trade between India, Pakistan and Afghanistan. Recommend

  • Inqilabi
    Sep 29, 2010 - 3:31PM

    Ms.Clinton is saying exactly what the donar agencies (IMF/WB) are saying….’broaden the tax net’….in other words…tax the non-tax payers like politicians, forces men, agriculturist etc. Why only the salaried class and businessmen pay taxes….and for what….the collected tax amount is being spent on the luxuries of government functunaries…who does not pay taxes at all. A recent shocking news item disclose that our PM and Yousuf Raza Gilani and 25 of his ministers admitted in ECP tax returns that they didn’t pay income tax at all. Most surprisingly the list include the names of Mr. Abdul Hafeez Sheikh (Finance Minister) and Ms. Hina Rabbani Khar (State Minister for Finance and Economic Affairs). What to say about the rest?

    The only solution is……..revolution. Inqilab Zindabad!!Recommend

  • Anonymous
    Sep 29, 2010 - 6:36PM

    Our Economy is in Shamble

    The consequences, the Great Depression and history tells us, will necessarily be a Formidable Chaos:

    Social and political turmoils, and military adventures.

    Neither supranational bodies nor governments can propose a plausible solution.

    What is Politically Correct is Mathematically Wrong!

    Do you feel that your ideology pushed you to make decisions that you wish you had not made?
    Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not. And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.
    You found a flaw in the reality…(!!!???)
    Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
    In other words, you found that your view of the world, your ideology, was not right, it was not working?
    That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

    It is our responsibility to create a meaningful increment of jobs, revenues and investments:

    We urgently need the only plausible solution that is offered to us:

    An Innovative Credit Free, Free Market Economy.

    It is your duty to insure your own security and economic survival, no one else will do that for you!

    History teaches us that men and nations behave wisely once they have exhausted all other alternatives.

    Credit Free Economy
    More Jobs, No Debt, No Fear.
    Prosperous, Fair and Stable.Recommend

  • Dr. Tahir Hayat
    Sep 29, 2010 - 7:35PM

    The salaried class in Pakistan is suffering. Because many in Pakistan do not pay tax, like the landlords, the shopkeepers and the industrialists, the government deducts heavy taxes from the salaried class. This tax is often deducted at source, that is the employer deducts the tax before paying. Now since 90% of the people who should pay tax are not paying, thus the government puts additional taxes on items of use such as Electricity, Petrol, Gas and the sales tax. The logic is that those who do not pay tax will have to pay through this indirect mean. But then what about the poor salaried man? He ends up paying both ways i.e. his own heavy income tax and heavy taxes on all the items that he uses.

    This is highly unfair and has to stop. The Salaried class must rise to protect its rights. Otherwise, the government, which does not have any salaried class representation, will skin them.Recommend

  • Sultan Ahmed
    Sep 29, 2010 - 9:26PM

    Time has come,
    all the rich and feudal lords will have to pay
    otherwise should stand for slavery.

    slavery still exist in may parts of the world
    millions of African were sold into slavery
    between the 17th and 19th centuries.

    In case, you will pay
    it will bright the future of the country
    otherwise permanent darkness become your fat
    choose the way leading to brightness and darkness
    I hope, you will choose the first option.Recommend

  • Sep 29, 2010 - 10:12PM

    Bravo! Hillary Clinton sees something that has generally been invisible to people in our government: that landowners grow wealthy in their sleep, and are collecting that wealth not out of thin air but from the labor of those who must pay them for the use of the land.

    Land rent — that is, the annual value of each piece of land, ignoring the improvements to the land such as buildings, drainage, fencing, paving, etc. — is the ideal source for public revenue. It doesn’t steal from producers that which they individually produced, but collects for public purposes value that the public created.

    When the US provides foreign aid, it increases the value of the land in the area getting it, and that value ought not to be permitted to flow into private or corporate pockets. It should be recycled for local and national purposes.

    And exactly the same thing can be said of public spending in the US, be it for infrastructure or anything else — up to and including that which is popularly referred to as “pork.” If the project is worth doing, it creates land value — often many multiples of the amount invested in the project.

    WHY ON EARTH DO WE LET THAT VALUE BE PRIVATIZED?? There or here.

    THAT is how wealth concentrates. Recommend

  • Tippu
    Sep 30, 2010 - 3:53AM

    Well said!!

    I believe and hope that the west stops all aid and loans to pakistan until the elite in pakistan are made to pay tax. Pakistan has become a professional bhikari and more aid will only feeds its habit of begging for more money. Please stop all aid to pakistan!!!!Recommend

  • ADE
    Sep 30, 2010 - 8:09AM

    Finally the lady is talking some senseRecommend

  • Ahmer Ali
    Sep 30, 2010 - 11:38AM

    Assalam-o-Allaikum Warahmatullah.Shame on you our beggars and slaves leaders.Now obey your masters’ commandments if you want to make yourself prosperous and make the poor nation much more poorer economically and socially and increase the poor and already debited nation’s difficulties and problems in the form of hunger,poverty and expensiveness so that they could commit suicides more are more on large scale.You should be given Victoria Cross on your this effrontery you have shown before the Pakistani nation.Recommend

  • Emmad
    Sep 30, 2010 - 4:49PM

    Ms. Clinton if you can make this happen believe me your name will be written in the golden words in the history of Pakistan because even the most powerful leaders of this country were fail to do this. Recommend

  • Ali Farooqui
    Sep 30, 2010 - 6:57PM

    They should also reconsider this flood taxation, their must be an income threshold on which this tax must be imposed rather than size of land. And if size of land must be pursued Tax should also be levied on agricultural and industrial land Recommend

  • Ben
    Oct 1, 2010 - 6:26AM

    Even President Zardari has announced that his government plans to tax the rich to help the poor i.e. flood-hit people. This is a welcome announcement but will the rich and mighty pay up or will they live up to their reputation of plundering but not paying back. Pakistan’s floods have placed the country at the head of a bumpy road ahead when the country is forced to make tough choices. Read more at:link textRecommend

  • Bangash
    Oct 1, 2010 - 8:03PM

    An excellent suggestion by Madame Clinton. The rich don’t pay little or no tax in Pakistan.Recommend

  • Oct 14, 2010 - 8:59PM

    Progressive taxation? What a novel idea! At first I was thinking (hoping) she was talking about taxation in my own native banana republic: The U.S.A. Well, she has the right idea, anyway. She should apply her prescription more …globally.Recommend

  • Oct 14, 2010 - 10:08PM

    See! This is what makes foreign hegemony such a welcome concept in Pakistan!
    This is why we like being ruled by foreign forces!

    Because we’re too dumb and cowardly to stand up for our own rights, and only too happy when someone gives our &%&^%&^%& rulers the tough love they need!

    Dear HC! If only we could “elect” you our PM!Recommend

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