Tax the ruling elite heavily, say experts

Development is hindered by tax evasion, dependence on foreign aid.

ISLAMABAD:

In wake of the current economic standing of the country where the development sector seems to be following a regressive pattern, experts have stated that taxing Pakistan’s ruling elite and reducing the country’s reliance on foreign aid would be a sustainable solution.

Addressing a seminar by the American Institute of Pakistan Studies, social scientist Akbar Zaidi said that one of the core problems facing Pakistan today is taxation. Zaidi said that there are exorbitantly high rates of tax evasion by Pakistan’s elite and taxpayers from countries supporting Pakistan’s development initiatives have been subsidising Pakistan’s elite disproportionately. Zaidi elaborated that even if all of the US aid to Pakistan is halted it would only affect the country by 0.34 per cent.

“This is a political economy and it’s not the US. It is Pakistan’s ruling elite that are selling themselves cheap. It is not worth it,” Zaidi added.

“Pakistan’s ruling elite are unwilling and they loathe taxing themselves. They exploit the country’s geographical vulnerabilities, extracting rent for many strategic alliances. Pakistan’s elite and western governments are equally at fault for the absence of more equitable taxation efforts in Pakistan.”

According to Federal Board of Revenue (FBR), eight per cent of GDP is lost due to tax evasion which is roughly worth Rs1.27 billion. He further revealed that 70 per cent taxes are received from the corporate sector. Zaidi explained that five to six million people in Pakistan earn more than Rs25,000 and even if two million of these people are filing tax returns, the country would have enough revenue to fill gaps.

“There needs to be less aid given so they [elite] stand up themselves,” he added.

Meanwhile, Aitzaz Ahsan said that changes in Pakistan’s legal system are inevitable to eliminate poverty, promote social justice and implement policies to promote equity. Ahsan added that the elite have been successful in avoiding the law and there is a need for uniform law enforcement for all the citizens, irrespective of their social standing.

Published in The Express Tribune, May 7^th, 2011.