Dr. Ikramul Haq
The main cause of our pathetic economic situation is existence of outdated, inefficient, corrupt and repressive institutions that are totally indifferent towards the welfare of the common people and making the state an economically viable entity. The successive governments’ ill-conceived, onerous and anti-people policies have reduced Pakistan to an economically unviable State. The recent events testify to it. Instead of blaming International Monetary Fund and others, we will have to move quickly and decisively to reverse the prevailing policies that can restore Pakistan’s undeniable geo-strategic and business competitive position in the region. There is an urgent need for the Government of Pakistan Tahreek-i-Insaf to take necessary decisions to make Pakistan a respectable place to work, live and invest. It must concentrate on balancing its forthcoming budget for 2019-20 by undertaking fundamental structural reforms, slashing unproductive expenses, taxing the rich and cartels, and reducing undue reliance on internal and external loans.
The following steps are inevitable if we want to make Pakistan a competitive place in today’s world:
- Fundamental reforms in the justice system and in administrative/governance apparatuses to eliminate the causes of litigation. Reforms in civil services, fair deal for employees with effective and across the board accountability. Compulsory public disclosures of assets by judges, generals and high-ranking government officials. Fundamental structural reforms for ensuring efficacy and accountability of all institutions.
- Revamping of education system to end ignorance and illiteracy, and make people skilful rather than distributing paper degrees and diplomas, Focal point of education should be creating a society that is tolerant, disciplined, courteous and knowledgeable—capable of making innovations and technological advances.
- Direct elections of Senate and giving it powers to vote on Money Bill.
- Live telecast of the national and provincial assemblies and Senate proceedings.
- Decentralisation of political, administrative and financial responsibility to local governments. Education, health, housing, local policing, and all civil amenities should be provided through elected representatives of the local governments having powers to raise taxes for these purposes.
- Digitization, transparency and accountability in the governments at all levels to enable citizens to understand and participate fully in the process of national integration.
- Elimination of terrorism, sectarianism, bigotry, intolerance and violence through enforcement of law and by taking concrete measures to ensure social development of society based on higher values of life and humanity.
- Strict laws and their effective implementation to curb terrorist financing, money laundering, plundering of national wealth, political write off of loans and leakages in revenue collections.
- Devising long-term and short-term strategies to break the shackles of debt-trap, making Pakistan a self-reliant economy and ensuring social security and economic justice for all citizens.
- Reform and strengthening of management of public finances. Transparent public sector spending coupled with efficient performance.
- Determination and political will to control wasteful, non-developmental and defence expenditure.
- Reform of technical, institutional and organizational dimensions of public finance.
- Good governance and corruption free government structures.
- Federal government should only collect income tax and customs duty. Harmonised sales tax on goods and services should be in the provincial domain. All federal, provincial and local taxes should be collected through one agency (National Tax Authority) which should also disburse pensions and other social security payments to all citizens.
- Reduction in excessive marginal tax rates making them compatible with other tax jurisdictions of the world, especially in Asia. Substantial reduction in corporate rate of tax. Elimination of onerous taxes and other regulations for corporate sector that are the main stumbling blocks for domestic and foreign investments. Simplification of tax laws and procedures.
- What we lack most in Pakistan is open governance that is a prerequisite for participatory democracy. This doctrine recognises the right of citizens to have access to the documents and proceedings of the government. The access to information empowers citizens to supervise the affairs of the state, performance of the public functionaries and elected representatives. Since 2010, it is fundamental right under Article 19A of the Constitution of Pakistan, though its full enforcement, like other rights, is still not made,
- In financial matters, in this era of information technology all public spending should be available on websites of all the departments/agencies/bodies so that public can scrutinise it. It will enable experts to give their input that would certainly be useful for quality spending. Media will also be in a better position to present facts, rather than creating hypes on conjectures. This would be the true implementation of Article 19A as its scope covers voluntary sharing of information by public institutions.
The juxtaposition of economic policymaking and political reform [democratization] of society is necessary. The agenda for reform and survival should entail a comprehensive, well-integrated and unified plan that alone can assure its success. The reform in one sector ignoring the ills in the other, resorting to improving something at the cost of leaving aside the one interlinked, will not yield desired results. The case of tax reform divorced to elimination of black economy is the point in focus. The main cause of fiscal deficit is existence of an unprecedented size of underground economy and the share of incompetence and inefficient tax machinery is significant, but reform in tax administration alone without routing the causes of parallel economy is not going to improve GDP-tax ratio.
The absence of true people’s representative rule in Pakistan, among many other factors, is attributable to lack of democratic values within political parties—they are dominated by individuals who openly defy laws and avoid transparency in their affairs. It is sad to note that political parties, despite criticism from everyone, are not ready to introduce democracy within their ranks. Unless these parties reform themselves by introducing fundamental changes in their working, there is dim hope for sustainable and participative democracy in Pakistan.
In all established democracies, political parties regularly hold elections, get their accounts audited and make these public, file tax returns, disclose details of expenses and names of donors-all these elements are conspicuous by their absence in our polity. Political parties and their ejected members in Pakistan, legally, are also required to follow many of such standards. But the regulators, Election Commission of Pakistan (ECP) and Federal Board of Revenue (FBR), have miserably failed to enforce the laws and regulations.
Under the law in Pakistan, political parties and politicians are required to file annual accounts and declarations of assets and liabilities. Our political parties seldom prepare accounts reflecting their actual affairs. They openly defy election laws. The purpose of these laws and rules is to enable voters, political workers, media and civil society to know about transparency in financial matters of political parties, but ECP is least bothered to enforce it.
Every year, ECP suspends a substantial number of lawmakers for not complying with the statutory obligation of filing annual deflations of assets/liabilities in time. There is no mechanism to verify the statements of assets and liabilities submitted to ECP as FBR does not verify data or take any action for understatement of incomes and assets by legislators. National Accountability Bureau [NAB] has also never bothered to check the veracity of declarations by legislators vis-à-vis standard of living maintained by them. In their tax returns, majority of them show emoluments received as members of Parliament the only source of income to enjoy palatial residences, expensive cars, foreign tours and army of servants!
It is a matter of record that political parties in Pakistan do not file tax returns and FBR has never bothered to issue them notices. In India, there is a mandatory provision of law [section 13A of Income Tax Act, 1961] requiring political parties to file returns. The Chief Election Commissioner of India requests the Indian Central Board of Direct Taxes (CBDT) to scrutinise accounts submitted by political parties. In the same manner, the Central Information Commission of India directs Income Tax Department to disclose in public interest, details of donors mentioned by political parties in their tax returns. With this information in public domain, the Commission says there would be transparency in the funding of both small and big parties, besides checking the flow of black money in the electoral process.
In Pakistan, neither ECP nor NAB/FBR has bothered to consider this vital matter. In Pakistan, on the contrary, the Protection of Economic Reforms Act, 1992 gives a free hand to tax cheats and money launderers to get billions whitened, which has never been examined by anybody from this perspective. All public office holders who have taken advantage of this law to avoid tax should have been disqualified for open admission of cheating the State but not a single case has been filed till today and ECP, FBR and NAB have never taken cognisance of it. They have never examined the assets held by elected members in the names of their dependants or benami [in fictitious names]. On the contrary, they have been offered frequent money whitening schemes. The latest one— Assets Declaration Ordinance, 2019, promulgated as Presidential Ordinance on May 14, 2019—is no exception.
It is high time to make filing of tax returns mandatory for all registered political parties, which should be scrutinised and made public with any citizen having the right to question their veracity. Donations and contributions received by parties should qualify for tax credits, Political parties are treated as non-profit organisations all over the world, working for public good. In Pakistan we have not yet promoted the idea that political parties should be exemplary non-profit organisations fully committed to further the cause of public consciousness and welfare on all matters related to governance. This idea is important from many angles. Once people associate themselves with a particular party having clear objectives and aims, they also extend financial support for their achievement, thus eliminating the influence of undesirable “financiers”—people with money power taking control of parties for personal gains. Meaningful participation of masses in democracy and electoral process can only be ensured if they have the right to question their leaders about use of their money. This would also make the party a responsible and accountable entity when in power.
Politicians need to act responsibly in all spheres-whether in power or in opposition. Their role is pivotal for effective working of institutions of the State. Being role models, it is imperative for them to show others by their conduct, the supremacy of rule of law. If they indulge in corruption and malpractices, the entire political system becomes discredited. Admittedly and rightly their main focus has always been on capturing power. There is nothing wrong about it. But once in power, favouring the near and dear and/or amassing wealth and power through unlawful means is what destroys democracy. While in power, they should demonstrate by their actions that they are custodians of public faith and are bound to work for public cause and not personal gains. Why have they failed to do so in Pakistan? The main causes are authoritarians within the parties, no respect for merit and lack of accountability. Presently, almost all political parties in Pakistan are controlled either by a single person or a handful of individuals with workers showing loyalty to their “chief” rather than to the party’s manifesto/programme. Obviously, in return, they expect personal favours from the “chief” when the party assumes power.
There is formidable resistance from politicians against establishment of an independent accountability authority in Pakistan as they know that such a body would expose their corruption and end their control over the State. The way forward is that political parties should be forced to keep proper accounts, get them audited by reputed firms and file income tax returns. Once this is made mandatory under the law, they would have no option but to take into their folds only those people who honestly discharge their tax obligations. The process of filtration within the parties is a necessary step towards a transparent and democratic set-up.
If Pakistan has to emerge from the prevailing political mess, democratisation of political parties is a must. Political life of an individual requires that he complies with all laws of the land—one demonstrative proof of it is to discharge fiscal obligations. If a politician does not pay his taxes honestly then how can he expect the man on the street to do the same? Lack of tax culture in Pakistan has its roots in the open defiance of tax laws by the rich and mighty. Not only have they kept themselves outside the tax ambit, they also take pride in telling others that tax officials dare not question them. For them this vulgar show of power is necessary to emphasise why they are superior to the meek common folk and thus have unchallengeable right to rule. With this mindset, the rulers in the past turned Pakistan into their personal fiefdom, and they wanted it should be inherited by their offspring. Imran Khan has shattered all their hopes and now they are “uniting” against him. After Eid, they intend to overthrow Imran Khan. Time will tell whether we start a journey towards survival or further chaos. It is high time that the politicians demonstrate through actions that they have learnt to respect each other’s mandate and refrain from the politics of victimization and revenge. In critical economic condition, we need unity and not confrontation.
The writer is Advocate Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS).