No more than a cathartic debate

Borrowing has become a habit. This is how we ended up being a nation without what is called the tax culture.

The thriving tax-dodging culture in our country is rooted in Pakistan’s loss of economic sovereignty very early in the day. Many would justify our founding fathers’ policy to borrow immediately following partition on the grounds that mother India had denied us our rightful share of financial resources from the divisible kitty, making it almost impossible for us to fund the gigantic needs of a newly-independent country. Borrowing was, perhaps, opted in the beginning to serve as a breather. However, the breather very soon had stretched into a long drawn dole-dependent curse covering the entire length of our existence so far. This has been and remains the root cause of corruption in Pakistan.

Here, I would like to refer to three books. One, by former prime minister Zulfikar Ali Bhutto (The Myth of Independence), the second by Dr Ishrat Hussain (Economy of an Elitist State) and the third by my friend Shahidur Rehman (Sovereignty Lost). Read together, one gets an inkling of what really afflicted us in the very first few years of independence. Our ruling elite, made up of landed aristocracy, civil-military bureaucracy and big business simply guzzled rapaciously the ‘easy money’ coming in from all directions. Soon, there emerged in our country two Pakistans — one, of the ruling elite with a First World lifestyle to maintain, and the other of the ruled poor, belonging to the have-nots of the Third World. Since then, the ruling elite have been making rules to promote and protect private profits at the cost of public interest.

Already, our defence budgets were being taken care of under the CENTO and SEATO pacts with tanks and fighter aircraft coming in mostly free of cost. We were renting out our bases and our armed forces to the so-called Free World engaged in a cold war. Even the proceeds from the sale of PL480 wheat were used for budget balancing. So, with both the economic and defence parts of the budget being taken care of by foreign dole, there was no compulsion on the part of the ruling elite to part with even a minuscule portion of their unearned incomes by way of income tax. Borrowing soon became a habit. This is how we ended up being a nation without what is called the tax culture.

Most of the incomes accruing to the members of this privileged class were, in fact, unearned as investments were being arranged for them on a 30:70 basis with banks providing the larger shares. They would recover their own share at one go by over-invoicing the machinery imported for the venture. And even before the venture would come on stream, they would skim off millions in unearned profits by manoeuvering to depress the value of shares of the venture and buying them back for next to nothing. The PIDC was also helping out by launching lucrative ventures and then selling them to people with contacts and influence at throwaway prices. It was the age of licences and permits. Evacuee property was being distributed among the influential, adding one more grasping dimension to the ongoing corruption. In addition, the big business kept upping their margins by stealing water, electricity and gas and exploiting labour to the hilt. Their inefficient and low quality produce was being protected by very high tariffs walls. Cartels and monopolies followed. Bhutto nationalised but Ziaul Haq gave them back to his political constituency against bank loans allowed without any collaterals.

Corruption silently eats into the vitals of non-democratic, closed societies. Matters come to a head only when there is nothing left on the plate to siphon off. That is what has happened in our case after the three extended military rules. There is not much left to loot. During the first Afghan war, according to a rough estimate, we received about 50 billion unencumbered dollars. However, when Zia died, there was nothing on the ground to show where all that manna had gone. In open societies where democracy and market economy function side by side, corruption makes a lot of noise and becomes a sexy topic of debate in the media, in parliament and in the courts of law. That is what is happening in our country today. But beyond catharsis, such debates accomplish nothing much. And in due course of time, the ruling elite succeed in buying off the debate and then it is, once again, business as usual.

Published in The Express Tribune, December 19^th, 2012.