Targeting tax evaders

The statement by Federal Board of Revenue (FBR) Chairman Salman Siddique that tax evaders, especially those with great wealth, would be targeted for collection should be cautiously welcomed. Siddique has made all the right noises, vowing that even those who are politically connected will not be spared. But we should be wary. Such rhetoric has been heard before but never enforced. Even if Siddique is well-intentioned, the FBR has a justifiably poor reputation for corruption and the chairman alone may find it difficult to change a culture of under-achievement and inefficiency. In the battle between entrenched political and business interests and reform, the reformists have always had to compromise their idealism.

It is heartening, though, that the FBR chairman seems to realise how crucial tax collection is to the economic and political health of the country. Pakistan’s budget deficit for the last financial year was over five per cent and IMF dictates to bring it down to four per cent can only be met by increasing revenue. Double-digit inflation has also wrecked the economy as the government has had to resort to printing money to meet its expenditures. Slashing the security net for the poor and eliminating subsidies has so far been the government’s only response to the deficit; nabbing those who have evaded tax collectors could allow more government spending on the poor.

Politically, a government that can find its footing is less likely to follow the orders of others. We must do what the IMF tells us because to ignore their orders could spell financial suicide. The same is true of US aid, which always arrives with conditions affixed to it. Much is made of the political sovereignty of the country but few have debated how our economic sovereignty has also been eliminated. Right now, the workings of the Pakistan government are being funded by foreigners. It naturally follows that the government will be more beholden and accountable to those foreigners than to its own citizens. Widening the tax net will not only give Pakistanis a say in the running of the country, it will also prevent the wealthy from getting a free ride at the expense of the salaried classes.

Published in The Express Tribune, June 9th, 2011.