Tax Corruption in Pakistan

Reuters photo

By

Zeeshan A. Shah

Never believe what you publish – Never Publish what you believe – Unknown

In the case of Pakistan, we would have to disagree. It is one of the more corrupt countries in the world today, not because of the corruption index in place but because of the chronic diseased mindset of the people who thrive through pain, hunger, lack of shelter, lack of governance and lack of the will to take action against corruption.

Where the world is making headlines in new technology, we are facing the dysfunctional mindset towards space and science. Where people make and sell cars, here we end up importing and selling dangerous drugs. Where the world is discussing rights of the child, we let our children suffer from abuse and isolation and lack of proper basic education and healthcare. Where people discover new ways to control infant mortality rates, we do not have safe and clean water for our children and we don’t care.

Yet the biggest truth about life in Pakistan is the mindset towards being an honest citizen. While governance is in the hands of the rich and affluent, they are the exact same people responsible for the financial chaos and corruption. The poorest of the poor pay 80% of taxes collected in Pakistan while the rich contribute to only 5%, while enjoying special rights, privileges and a concessionary lifestyle under the country’s unethical tax structure and policy, that the rich control and exploit very openly.

The country’s indirect taxes constitute 80% of the tax-revenue collection that are recovered from the poor middle class segment of society through petrol, utilities and mobile communication. For example, over 36 million mobile phone users paid over USD 4.6 million for the year 2015-16 tax collections while the majority of them were not even in the taxable bracket. Sadly, the same indirect taxes apply to both the privileged class and the rest, leading to major income disparity. No wonder Pakistan has had the record breaking trophy of being the country with the lowest tax to income ratio in Asia.

Real numbers indicate a horrific picture where only 12% is recovered through direct taxes while 88% is collected indirectly by virtue of unethical tax policies of successive governments including the one today, facing major corruption and fraud charges and being one of the longest running governments in the country and an elitist government, making the poor people cough up more and more revenue despite having little or no capacity to pay. Indirect taxes hurt low income groups, which are 80% of the population, while the rich segments remain undocumented, hence untaxed.

The FBR-Federal Board of Revenue is unreliable and malfunctioned to do its own job and has failed to ensure transparency as it is controlled by the Ministry of Finance who is directly related to the Prime Minister of the country and whose personal assets have increased 91 times since he joined government.

How can accountability flourish under such bad governance?

According to figures, the FBR regional tax office collect $68 million out of the total of $31 million billion in collections, whereas the cost incurred by the FBR to maintain their offices cost $78 million. This is clear corruption in the pockets of the officials that is being promoted by the government despite the fact the government cannot even justify the existence of FBR and may be in a better shape without having these huge administrative costs under corrupt leadership.

In a country where a mere 500,000 people pay taxes out of 4 million people, indicators reveal a huge problem of bad governance and zero accountability. The elite contribute to less than 5% to tax revenue when they control over 55% of the wealth. The system has been completely toned down by the policy makers, while businesses skip taxes legally and the poor people end up holding the tax burden on their heads.

The elite, who constitute a powerful land mafia and belong to the agricultural lobby, are part of the decision tree that is sitting in parliament, hence none of the laws adopted or made support tax collection from the high and mighty. These people are the rulers of the country whereas someone who is not a tax payer should not be eligible to contest elections as it constitutes tax evasion, a crime punishable by law. Less fortunate countries are lucky, as they can learn from the cost others had to pay to attain the supreme country status. Such a country cannot aim for global dominance but should concentrate on being adaptive and having a sound financial health.

Illicit trade, organized crime and corruption are major challenges for Pakistan today. Instances of state failure, terrorism and geo-political conflict are directly proportionate to rising instability, nepotism, chronic negative business trends and systemic economic breakdowns. Financial mismanagement, money laundering, racketeering and tax evasion have severely undermined the efficiency of good governance, increased global risk and adversely affected global stability. Meanwhile, incentives to operate in such parallel economies continue to increase both dangerously and globally.

Internally, Pakistan society experiences moral decay, massive brain drain and diminishing intellectual capability, as the motivation to stay positive declines rapidly due to the continuous moral and ethical brainwashing of society. Externally, such countries are isolated, tourism diminishes and the entire society is marginalized. Greed has no limits and greedy businesses don’t last long –there is always a catch somewhere and always a loss. We need to look on the inside, clarify business rules, imbibe good business ethics, and find solutions to administrative failures by seeking answers from the ones who stand above the law today while being lawmakers.

Where corruption is a social norm, we need to ensure that we reject bribery and corruption and make very stringent laws and punishments to cut down this cancer of the mindset. Unawareness of the pitfalls of corrupt practices puts a business’ reputation at serious risk. Any kind of illegal offer or payment to the government, third party vendors, regulators, existing or potential customers – or acceptance of the same from them – must be subject to prosecution.

Dictatorship is Fascism. No difference. Fascism is a radical authoritarian political ideology governed by a leader who exercises dictatorship over the government and all state institutions. Pakistan is currently being ruled by dictators and this has to stop in order for the people of the country to be able to work, live and survive as a nation of honest and dedicated people who stay and work for its betterment rather than travel and leave the country to work outside and never return back home. They will never be home hence will never contribute to taxes in the country knowing that the rulers of this country eat up their hard earned income and use the tax to elevate their own corruption through corrupt assets held offshore and having larger than life lifestyles, buying out whatever they wish and whenever. This is a deadly trap that has to be destroyed through efficient tax collection and strict legal and compliance through accountability and justice.

Zeeshan A. Shah

The writer is a Director at CNNA Pakistan – a leading advocacy institute and is an expert on International Relations and Education Policy.

With over 150 publications in major local and global social media & newspapers, he has been instrumental in producing over 5000 radio broadcasts aired globally.

A thought leader, environmental journalist, media broadcaster and a change maker with an acute focus on development affairs & education for Pakistan.