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PTI: forgotten promises

Huzaima Bukhari & Dr. Ikramul Haq

People of Pakistan in general and businessmen in particular are quite disillusioned with the performance of Pakistan Tehreek-e-Insaf (PTI) after seeing that prices of items of daily use (food, medicines, petrol, utilities) have skyrocketed in just a few months and business activities have been substantially slowed down leading to drastic cut in economic growth and unemployment. The cost of doing business has increased manifold making industries uncompetitive to produce exportable goods. Agricultural sector is also facing the brunt of wrong policies (heavy taxation of inputs and costly energy) and rural poverty is on increase.

Unfortunately, PTI after taking power has forgotten what it promised to masses during election campaign, and ignored what was suggested to it in various articles [Essential reforms, Business Recorder, March 29, 2019, Challenges for budget-makers, Business Recorder, March 22, 2019, Optimising tax collection, Business Recorder, March 15, 2019, Fixing the ailing tax system, Business Recorder, March 1, 2019, Country needs massive reforms, Business Recorder, January 25, 2019, Time up for fiscal integration, Business Recorder, December 21 & 23, 2018, Tax policy for investment, Business Recorder, December 14, 2018, Productive tax reforms, Business Recorder, October 27, 2018, Overcoming fragmented tax system, Business Recorder, October 19, 2018, PTI & revival of economy, Business Recorder, October 12, 2018, Bridging the tax gap, Business Recorder, October 5 & 7, 2018, Case for All-Pakistan Unified Tax Service: PTI & innovative tax reforms, Business Recorder, August 31, 2018, Overcoming debt burden, Business Recorder, August 27, 2018 and PTI and tax reforms, Business Recorder, August 17, 2018].

On October 4, 2018, the Government of PTI launched a website (pm100days.pmo.gov.pk) for “public to know progress about the PTI’s 100-Day Agenda”. Adviser to the Prime Minister on Establishment, Mohammad Shehzad Arbab, made tall claims about “track our performance” and threw a challenge that “after 100 days you can hold us accountable and we will tell where we stand. What we have achieved”. The retired bureaucrat-turned-adviser publically averred that “K-P’s model of governance would be applied all over Pakistan”. The model of Khyber Pukhtunkhwa is before us—the disastrous handling of BRT project! The same thing happened to website aimed at “trekking PTI’s performance”. This presents a classic study to prove how our existing and retired bureaucrats capture every political party in power and then play havoc with everything! Fault lies with political parties that allow them to undertake what they are not capable of and check their inefficiency, corruption and nepotism—hallmarks of our bureaucracy. One can only cite Mir Taqi Mir for this situation: Mir kya sada hain, beemar huay jis ke subub; Usi attar kay londay say dawa laity hain (What a simple soul is Mir that he seeks medication from the healer’s boy, who is the cause of his ailment).

The economic plan of PTI as part of ‘Imran Khan’s First 100 Days Agenda’, as elaborated by Asad Umar on May 18, 2018, included creation of 10 million jobs within five years, imparting skills to youth, promotion of the manufacturing industry and paving the way for speedy growth of small and medium-sized businesses. He announced that all government guest houses would be turned into hotels and made available for the public, and that four new tourist spots would be discovered within the first 100 days. He said that PTI, if elected would transform Pakistan into a business friendly country, undertake tax reforms and construction of 5 million houses, among the main points of the proposed 10-point economic policy. He promised constituting of “Council of Business Leaders” to improve Pakistan’s global business standing. He also gave the idea of “Pakistan Wealth Fund” to bring about revolutionary changes in Public Sector Enterprises (PSEs) such as the Pakistan International Airlines, Pakistan Steel Mills and power distribution companies etc. He made a pledge to turn the ongoing China-Pakistan Economic Corridor (CPEC) into a revolutionary project and improve the citizens and industrialists’ access to capital.

Now after going to the International Monetary Fund (IMF) for another bail-out with tough conditionalities, Finance Minister, Asad Umar, in an interview in Washington, said: “PTI is trying to protect the Pakistani people from further, immediate, hard-hitting policy interventions”. The interviewer made an observation: “On the whole, I came out of the conversation feeling bullish about Umar having good intentions and a fierce personal discipline and competency to solve Pakistan’s problems. I do fear that lack of bureaucratic capacity to execute his policies and high expectations that PTI set for itself are significant challenges that can sink or swim Asad’s reform journey for Pakistan”.

The issue of ‘bureaucratic capacity’ has not been tackled effectively by PTI after coming into power though in initial days it showed eagerness to take administrative reforms as top priority as appointed Ishrat Hussain as Advisor to Prime Minister for Institutional Reforms & Austerity. In his inaugural address to the nation after assuming office, Imran Khan gave an impressive speech outlining his vision for ‘Naya Pakistan’, promising sweeping changes at a massive level, to cut down on expenses and to introduce structural reforms for revamping the cash-strapped country. What happened afterwards is known to all. He started depending on powerful ex-DMG (now PAS) cadre and they frustrated every effort of meaningful structural reforms in bureaucracy, especially in Federal Board of Revenue (FBR), the most vital organisation for economic salvation of the country by optimizing taxes and facilitating investment and growth. The PTI even after two supplementary finance acts, allowed FBR to follow the old policies of Ishaq Dar by resorting to oppressive taxes, destroying economic growth and widening fiscal deficit.

The PTI government has conveniently ignored the comprehensive tax policy it unveiled on August 24, 2012. In the said policy, PTI proposed concrete and rational measures for revenue generation in Pakistan. These tax measures were totally ignored after coming into power, courtesy the influence of DMG-clout and FBR-Revenuecracy. If the said policy is implemented, it can change the fate of Pakistan. The details of the said policy can be seen in PTI agenda not a tough sell, Business Recorder, August 31, 2012. It is strange that during election campaign in 2018 and after coming to power, PTI forgot what it prepared way back in 2012!

PTI must realise that one of the main reasons why people’s rule has failed to take root in Pakistan is monopolisation of resources by the a trio of indomitable military complex having control over many businesses and state lands, feudal aristocracy enjoying political clout and businessmen-turned politicians on the hunt for bank loans and their subsequent write-offs and remitting of billions outward and inward abusing obnoxious laws like Protection of Economic Reforms Act, 1992 and Foreign Currency Accounts (Protection) Ordinance, 2001.

Empowerment of the have-nots, imparting of education and skills to all without any discrimination was and still is the main agenda of PTI, but like their predecessors, the traditional political parties, after coming to power, it failed to realise that unless an agenda of change is implemented, there is no hope for any betterment in the outdated, worn-out and oppressive socio-economic structure of Pakistan. The system is captive in the hands of mighty sections—militro-judicial-civil complex and greedy politicians. The Naya Pakistan cannot be constructed on this old foundation. The faulty foundation has to be replaced first and then only can the new superstructure sustain.  

PTI must understand that institutional reforms are sine qua non for achieving sustainable economic growth leading to better revenues. The elitist structure is the main hurdle that needs to be dismantled []. Revenues are byproduct of growth, which is being retarded by ill-advised policies of austerity and creation of fear by PTI Government. Threatening the existing businesses through FBR/FIA/NAB or refraining the prospective local and foreign investors by way of hostile policies, laws, rules and regulations is a sure recipe for economic disaster and this is what has been done so far by the inexperienced PTI team that is relying heavily on bureaucracy.

Pakistan is ruled and controlled by a few who pay less than 2% in terms of personal taxes despite holding 95% of national wealth and assets. Since they are not ready to pay taxes due from them and bent upon looting the wealth of nation through corrupt practices, Pakistan is moving towards complete economic collapse. Present tax system of Pakistan negates the basic precept of democratic dispensation requiring that those who possess more economic power (income and wealth) contribute more towards national exchequer—progressive taxation being the most equitable and just method is emphasized upon primarily for its redistributive role. In Pakistan it is the other way around. The rich are thriving on the money collected—rather extorted—unjustly from the poor.

Article 3 of the Constitution of Islamic Republic of Pakistan says: “The State shall ensure the elimination of all forms of exploitation and the gradual fulfilment of the fundamental principle, from each according to his ability to each according to his work”. The powerful trio, mentioned above, enjoys complete immunity from this principle. The existing tax system, contrary to the Constitution, protects the rich and mighty—the establishment and exploitative elements have complete monopoly over economic resources and the poor are dying of hunger and diseases. Since the privileged classes are not ready to pay taxes and share resources with the masses, the incidence of tax is mainly on the less privileged classes and the poor. What makes the situation more tragic is the fact that whatever is collected, the major part of it goes for debt servicing and meeting the luxuries of rulers—in the end nothing is left to provide even for fundamental services of health, education, transport and housing for the masses and government borrows money for running day to day affairs of the State.

Determination of a tax base capable of measuring an individual’s ability-to-pay is a major problem of our tax system. This rule is incorporated in the form of progressive rate schedule for personal income tax, estate duty, and property tax worldwide. In Pakistan we have moved from this policy to regressive taxation where the mighty civil and military bureaucrats (now an integral part of our landed aristocracy by earning State lands as meritorious awards and rewards), rich industrialists and greedy businessmen are paying meagre personal taxes. On the contrary, the poor are compelled to pay exorbitant sales tax on goods and services (levied under federal and provincial laws). This is absolutely criminal and a blatant violation of Article 3 of the Constitution.

We keep on hearing in media that Pakistanis do not pay taxes. This is half truth. The fact is that it is the rich and mighty that do not pay due taxes. Prior to stay by the Supreme Court, about 95 million unique mobile users [total number of subscribers as per Pakistan Telecommunication Authority reached 157 million but many have multiple or inactive SIMS] had been paying both income tax and sales tax but return filers for tax year 2017 were 1.8 million which number for tax year 2018 is expected to reach 2 million. Majority of mobile users did not have taxable income yet were burdened with undue liability. On the contrary, many rich people till today just pay a fraction of income tax (withheld at source) on their actual taxable incomes without bothering to file their income tax returns and FBR has miserably failed to assess the rich and mighty. At least 20 million people should file returns on the basis of available data from companies providing utilities alone but PTI is very happy with one-tenth of this number. This shows it is subservient to Revenuecracy that still prevails in policy matter though on paper Asad Umar has constituted Policy Board!

The dream of making Pakistan a self-reliant and egalitarian State can never be realized unless the mighty sections of society pay personal taxes. At the same time the tax policy must be a tool for investment, industrialization and employment generation—taxing unproductive sectors to divert money towards productive sectors. Above all, it is necessary to provide socio-economic justice to all the citizens—progressive taxation ensures redistribution of income and wealth by taxing the rich for the benefit of the poor. At present, we are taxing the poor for the benefit of the rich. This trend must be reversed if PTI wants to bring positive CHANGE for making Pakistan prosperous.   


The writers, lawyers and partners in HUZAIMA, IKRAM & IJAZ, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)

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