The Verdict
Tax contribution: Show me the money

Tax contribution: Show me the money

Taxation should be considered a civic duty rather than a burden - there should be no honour in not paying.

Nadir Eledroos December 26, 2010

Taxation forms the backbone of state finances.

The military, as an arm of the state, relies on state finances for its budgetary requirements.

As I am often reminded, the Army is in a state of war, so one should support it without any criticism.

However, any commentary that comes through the media or official sources, everyone agrees that the military is underfunded.

A political hot potato

While we are in a state of war, the RGST has become a political hot potato. The opposition has jumped on the anti-RGST bandwagon, while other parties such as the TI and JI prefer the, “taxes imposed under foreign diktat” line of argument.

Whether the RGST is required or not, is a debate for another article. Why those patriotic Pakistanis that should be paying taxes under current tax laws and are not doing so, thus forcing the imposition of the RGST on the already overtaxed, whilst the country is in a state of war is shameful.

Individuals use their influence, power and position to influence tax policy, lobby for exemptions or avoid taxation all together. Others cite corruption and the inability of the state to offer state services, as a reason not to fulfill their legal tax contributions.

These arguments and many others help explain our general apathy towards taxation. However, it is not only taxation where avoidance is common. Money sent home by overseas Pakistani’s often bypasses official channels, making its way through the unofficial Hundi or Hawala networks. Valuable foreign exchange never enters official channels, which could help bolster the nation’s foreign exchange reserves and make us less venerable to and reliant on foreign financing.

All talk no action

Whether the state, and her administration are corrupt or not, shapes our perception and the relationship between peoples wallets and formal channels of finance. Then again, no one likes paying taxes, so whether people would willfully pay taxes even if the state were squeaky clean is also questionable.

The irony is that some amongst us are more than willing to spend a lot of money portraying ourselves as patriotic, though will not part with an equal sum in the form of a voluntary tax contribution. If you happen to be a real estate developer, industrialist or politician, you will get away with paying little or no taxes, however, you will display your patriotism by putting up some billboards leading up to 14th August or 6th September (you know who I am referring to here).

Given that, the Minister of State for Defence Arbab Muhammad Zahir and ex-Defence Production Minster Abdul Qayyum Jatoi are amongst non-income tax filers suggests an extremely casual analysis of the affairs of the defence departments by her Ministers, given that the nation is in a state of war.

Agriculturalists that are exempt from taxes, the industrialists who are lobbying for exemptions, and the self-employed who just do not bother to file tax return, are at the forefront of any sabre rattling opportunity, may it be on the streets or as “experts” on television talk shows.

Put your money where your mouth is

Our nation’s elite has succeeded in reducing patriotism to flag waving, empty slogans and repeating the impotent statement that “all resources required for the nation’s defence will be provided”.

Even if most people disagree with most of my opinions, I am sure we all want a well-equipped, well-trained and adequately resourced military or police, FC, levies, rangers etc for that matter. Our economy and military are dangerously dependent on external financing and no amount of sabre rattling is going to alter that reality.

The country is in a state of war, yet the state’s ability to fight the same war and pay the wages of, equip and train the same soldiers who I am constantly reminded, are sacrificing themselves on a daily basis, depends on foreign assistance.

The least we can do is to articulate a counter narrative that challenges the current “I don’t pay taxes because I have contacts” or “why should I pay taxes, the government does not do anything”. Taxation should be considered a civic duty rather than a burden. There should be no honour in and social acceptability of getting away with not paying ones liabilities.

The fact that some people evade taxes and shape taxation policy to suit their interests is plainly illegal and immoral, and should be treated as such.

Similarly, if you are an overseas Pakistani then you should shun unofficial channels of remittances in favour of legal ones.

Individuals who demand unquestioned nationalism and admiration of the military, are at times the same people who are curiously silent when it comes to building pressure on those individuals who contribute nothing to the state, and by extension the military. That too during a period when Pakistani citizens are being killed either in combat or in going about their daily lives.

WRITTEN BY:
Nadir Eledroos Nadir teaches Economics at Bellerbys College, London and is interested in Pakistani politics and current affairs. He tweets @needroos (https://twitter.com/needroos)

The views expressed by the writer and the reader comments do not necassarily reflect the views and policies of the Express Tribune.

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COMMENTS (11)

Ali | 13 years ago | Reply The rich hold a disproportionate amount of the wealth, in many cases via inheritance in the form of the Nawab curse that afflcits Pakistan. They pay nothing because no one can make them. The poor have very little, but becaase they are poor/ powerless, nothing can stop the government, which is a voracious consumer of money, from taking what little they have. The retail tax is just another tax on the poor. The rich don't have to worry about it. The tax maybe 5% of the already meaager income of a poor person, but for the rich it will proabably be something in the order 0f 0.00000000000000001% of their income if that. What we need is a way of taxing the rich. Everything else is waste of time. It will not achieve anything and then the poor will fall into an even further miserable state. Perhaps we should bring in the army to collect taxes. Then may be the army would spend more cautiously and the rich would not get away with out right theft.

Syed Nadir El-Edroos | 13 years ago | Reply @Liaqat: There wouldnt be a need for new forms of taxation or increases in current rates of taxation if people actually paid the original taxes. In a country where tax dodging, stealing electricity and getting away with not paying municipal taxes is considered something to boast about - we are surely stuck in a race to the bottom. anyways, more to my point, today there was a column: Finance Ministry’s advice to PM: No security allowance for civil and armed forces in this paper. Again most of the comments demand that all "resources" should be provided to our brave soldiers. Yet these same people find it beyond their patriotic duty to pay their own taxes or encourage others to do so. No amount of nationalistic rhetoric is going to pay the bills. @Ateeg: You seem to be confirming my hypothesis, I have highlighted the same points in the article. I am not hazed at all by Western notions, they are unravelling themselves as we speak, I am just suggesting that all those people who are overtly patriotic should do more than chant slogans, especially those: landlords, politicians, bureaucrats, industrialists etc who get away with not paying their taxes and also being in a position to influence taxation policy to shift the burden onto those who already bear anunfair incidence on themselves.

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ateeqkhan | 13 years ago | Reply aren't you obsessed with military a tad too much? your tunnel vision is severely hampering your ability to think critically... most of those who don't pay taxes are your beloved democrats... even if rgst (supposedly balance) is implemented, they would still not pay the taxes... there is not tax on holding outstanding stretches of land... its the existing system that needs to fixed first... you are too impressed and surrounded in the haze of the western notions, but realities in our par of the world are entirely different...

Liaquat Ali | 13 years ago | Reply @Nadir, Somehow the angle you elaborated in the comment section was not clear to me in the main article. Thanks for the clarification. Now coming to the "highly progressive taxation system," with lots of apologies I beg to differ. :) My limited reading on the taxation in the world has taught me one thing: Tax laws are ALWAYS, ALWAYS overtly passed by promising to the voters that the tax burden would ONLY be heavy to those who make a lot of money. With time the statues are covertly modified to "increase the tax net." Based on the services currently provided by the government to the citizens Pakistanis must resist taxes and insist on: land reform, which is automatically bring millions of Pakistanis in the tax net Reduction in corruption, Reduction in lavish government expenses and Increase in proper use of natural and human resources to provide direct benefits to the citizens. Unless external borrowing is eliminated which brings money from one hand and siphons it off to foreign accounts from the other, and unless the Pakistani establishment gives up on its obsession with India and armed interventions outside the country's borders no amount of taxation would ever be enough.

Syed Nadir El-Edroos | 13 years ago | Reply @All: Thank you for the comments. @Liaqat: I completely agree. The incidence of taxation should not fall on those who already face a dispropotianal degree of taxation. I personally am all for a highly progressive taxation system. However, my article here is not a debate on particular taxation policies. My emphasis here is to point out the hypocrisy of many people, who are highly critical of people who would suggest that the military should be more accountable etc, or demand that all "resources must be provided for the nations defence". Fair enough, but then these are the same people, who dont themselves pay their taxes but think that Pakistan's defences are being strengthened while the nation goes into debt. I will emphasise my closing statement: Individuals who demand unquestioned nationalism and admiration of the military, are at times the same people who are curiously silent when it comes to building pressure on those individuals who contribute nothing to the state, and by extension the military. That too during a period when Pakistani citizens are being killed either in combat or in going about their daily lives.

abc | 13 years ago | Reply Pay taxes for? to line the pockets of the politicians and 5 of their generations? If i had a choice i would never pay though i do understand my economics of public goods that nobody but the govt will provide for. Hence on that note, i say we form community taxes, private individuals are responsible for the collection and spending of the same, to improve the infrastructure of the community/area first and then move beyond those borders. yahan sab kuch khud hi karna chahiye, why rely on the govt.

parvez | 13 years ago | Reply Good article and fully agree with the first comment of @Ahmad Ali. The way things are structured 2% of the people are living the good life at the expense of the other 98% and the 2% have no intention to change things. Why should they ?? A structural change is necessary if the state is to progress.

rukun | 13 years ago | Reply they make a bad product, we stop paying for it.

Liaquat Ali | 13 years ago | Reply Pakistan is not an old-aged country with well-developed welfare programs where bottomless pit of tax dollars are needed to fund internal welfare and aging infrastructure and unnecessary external wars. Note: The more money these generals get the more they will waste the same to explore "strategic depths" and to build exclusive golf-course communities. Pakistan is a natural resource-laden, young country with most of its population under 30 years of age. It does not have massive infrastructure and welfare roll to fund at this time. So the talk of tax-paying patriotism is misplaced. Various governments must stay as small as it needs to be. Tax burden on the population should stay as low as possible. The governments must find ways to fund themselves through public-private partnerships. Some of which were tested in Karachi during Mustafa Kamal's administration. At some time in the future everyone will have to pay taxes to fund aging infrastructure and to care for the old-aged population. Let's not fund the corrupt with the misplaced talk of civic duty and all. Let people keep their money where it belongs. Under their own respective mattresses or some like that. :)

Liaquat Ali | 13 years ago | Reply The most meaningful "counter narrative" involves: How to yield more taxes without levying more taxes on those who are already pay them. How to reduce corruption to put more collected revenues to proper use. Note: Forget "eliminate" because elimination of corruption is never going to happen. How to reduce expenses to put more collected revenues to proper use. Browbeating the taxpayer falls in the same category as blaming the raped and making excuses for the rapist.

Ahmad Ali | 13 years ago | Reply Great article! At the heart of this debate of the RGST is an underlining moral discussion, and that is the question of taxation. What is the moral status of taxation? Should the rich have to pay tax? Why should the rich bother paying tax anyway? Indeed why should the rich even bother paying any of their wealth? Should the State even bother providing services, when indeed the private sector could perhaps do it more efficiently? If taxation is to be considered a civic duty, then we need a civic culture. We need a robust and pluralistic conception of citizenship and more transparent and accountable institutions.

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