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 Budgets & elitist structures

Huzaima Bukhari Dr. Ikramul Haq

All annual budgets of federal and provincial governments—civil or military—for the last four decades, especially tax proposals through Finance Bills, strengthen elitist structures. The year 2021 is no different when millions are in dire need of money after three waves of covid-19. The coalition governments of Pakistan Tehreek-i-Insaf (PTI) in three provinces and that of Pakistan People Party (PPP) in Sindh only raised indirect taxes, and not a single tax on the rich is levied to generate funds to help the needy. In their manifestos and public meeting they pose as if the only purpose of their rule is serving the less-privileged and help them to come out of poverty trap, but acts speak otherwise.   

Our elitist economy serves the rich and offers little for social mobility of the deprived classes. Contrary to what is commonly understood, elitist structures are not represented merely by a handful of individuals controlling state institutions and enjoying tax-free extraordinary perks, perquisites and benefits. These structures reflect in all sorts of discriminations—in taxation, extorting money from the poor for the benefit of the rich, in academics, non-availability of quality education and health facilities for all, crony capitalism creating monopolies, denying finance to brilliant young entrepreneurs for starting and competing with established businesses, rent-seeking opportunities created through state policies for politicians in power and non-providence of social services to the masses etc.

The Constitution of Pakistan in its essence is egalitarian but exploitation of all kinds continues unabated though Article 3 of the Constitution of the Islamic Republic of Pakistan that says: “The State shall ensure the elimination of all forms of exploitation and the gradual fulfillment of the fundamental principle, from each according to his ability to each according to his work.

For decades, Pakistan remains captive in the hands of indomitable militro-judicial-civil complex, landed aristocracy, industrialist-turned politicians, wealthy traders, influential ulema (only pseudo religious scholars, not all), pirs(so-called spiritual leaders sitting in senate and assemblies) and business tycoons. Flouting the rule of law with impunity is their hallmark. They openly indulge in ostentation of money and power to prove that the rule of law is for the weak, they are in control of the country’s resources. Since they pay negligible income tax, the redistributive function of personal income taxation is absent—in just ended FY 2020-21, it was Rs. 1738 billion, 3 percent of GDP at Federal and 0.06% at provincial level.     

Pakistan’s economy serves only the privileged classes. The militro-judicial-civil-complex, politicians and absentee landowners represent less than 1% of the entire population of over 220 million, but enjoy unprecedented perks and benefits at the expense of taxpayers’ money. In the federal and provincial collections for just ended fiscal year 2020-21 their contribution in income tax on agriculture and non-agriculture tax was reduced to a ridiculous level while during corona virus days, they were supposed to contribute more. On an average, a rich non-salaried individual having annual agricultural income up to Rs. 4.8 million in the current financial year (2021-22) will 15% tax as compared to high-paid salaried professionals of 25% on the same income. While, those providing employments to millions pay corporate tax of 29% plus many other levies and double taxation on dividends. How can we achieve sustainable growth without new investments and rapid industrialization? Federal Board of Revenue (FBR) collects nearly 45% taxes on import stage (whereas ratio in other countries is not more than 5%), hence, collection of Rs. 4731 billion is mostly (over 65%) is from indirect taxes.   

Shaukat Tarin, yet unelected Finance Minister, wants higher and sustainable growth which is not possible through tax codes discouraging savings and investments. These are enriching the already wealthy individuals! The elitist business groups are not ready for competition and want “protection” through high tariffs to deny buyers the right to buy quality goods at cheaper rates. The rich-poor divide through such erratic taxes will further increase. There will be more concentration of wealth in fewer hands while the poor pay tax on mobile talk of more than 5 minutes! Growing inequalities in income and wealth is a serious issue in Pakistan and regressive taxation is further aggravating it. In this tax system, the rich get subsidies. The average worth of Pakistani members of Parliament is $900,000, but income tax contribution is less than 1% of total collection.  

The State is obliged under the Constitution to provide free education and arrange health care for all. All the governments, federal and provincial, are not fulfilling their constitutional obligations and have given free hand to private parties to fleece people in the name of providing health and education. There is no will to tax these commercial ventures and spend money for improving public schools and hospitals. The meagre funds allocated for these sectors are squandered by officials—students and patients get raw treatment in government-run schools and hospitals. On the other hand, clubs, golf courses and rest houses serving upper echelons receive grants from public funds. 

How public servants thrive on the taxpayers’ money and exploit foreign funding is an open secret. Most of them get scholarships of foreign agencies to attend elite universities in the United States. They openly express their elitist views and right of such entitlement (scholarships). Their children born during stay abroad automatically get US citizenship.  When back with their families to lord over poor Pakistan, their children go to the finest schools and live in public estates nobody in the West can imagine. After high school, the US-born children apply to the finest universities in the US like Harvard, Columbia etc and get not only admissions but also financial assistance as they fill out financial aid applications and only provide information about their parents’ nominal salaries in rupees and not the full monetized value about the other perks, privileges, and plots their parents have.  Without fail they are given free rides in American universities because of the apparently extremely low income households they come from!!  After graduation they stay there and easily get jobs because they are Americans thus providing a comfortable beach head for their ‘poor’ parents. These are the real fruits of elitist structures that are not available to the country’s common man’s child. 

Thus no wonder in Finance Act 2021, passed by Parliament on June 29, 2021, not a single progressive tax is levied on the rich to bridge the fiscal deficit of nearly Rs. 4 trillion [Anti-people and anti-growth, TNS, [Political Economy] The News, June 20, 2021]. On the contrary, taxes are raised on the poor and the middle class through indirect taxes. At the same time borrowing from banks and elsewhere continues to push the nation towards the darker abyss of the ‘debt prison’. Foreign debt alone is now about $120 billion. The elites are happy as their life is not affected by covid-19 or any taxation—rather they are enjoying more benefits and perks, free plots to free club facilities, all financed by the poor taxpayers. The burden of indirect taxes finally passed onto end users and becomes confiscatory for the extreme poor.  

Sufferings of Pakistani poor and less-privileged classes will not end unless elitist structures are dismantled and the society is restructured on the principles of equity, fairness and justice—the fundamental elements of constitutional democracy. The problem of Pakistan is not scarcity of resources, but its unjust distribution as well as incompetence in exploring and managing them, lack of an effective judiciary and socio-economic injustice.

High and sustainable growth is not possible with the present oppressive tax system. The first step should be taxes for public welfare and monetisation of all perks and perquisites of judges, generals and civil bureaucrats who must pay tax on fairly-determined ‘Consolidated Pay Package’ as others are doing. Consolidated Pay Packages for them according to market wages would reduce corruption, remove sense of elitism and improve governance. Without these reforms and fiscal decentralisation[Article 140A of the Constitution], we cannot hope to achieve rapid growth ensuring equal opportunities and jobs for millions of young people, whose frustration is on the rise with each passing day as elites show apathy towards them and enjoy luxuries at the taxpayers’ expense. This can push Pakistan to complete chaos and collapse. This is a wake-up call for elites lest it is too late to follow what was highlighted in Taxes for welfare, TNS, [Political Economy] The News, April 22, 2018!       


The writers, lawyers, writers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE).

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