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Taxes, social services, gender & equality

Dr. Ikramul Haq

 The United States government, through the U.S. Agency for International Development (USAID), today [June 24, 2021] launched the Women’s Economic Empowerment Activity (WEEA). This five-year initiative supports the Government of Pakistan’s efforts to promote women’s social and economic empowerment through safe and dignified access to income opportunities, information, resources, and services—For more information on USAID assistance programs in the Economic Growth and Agriculture sector: https://www.usaid.gov/pakistan/economic-growth-agriculture

World Development Report 2021: Data for Better Lives explores the tremendous potential of the changing data landscape to improve the lives of poor people, while also acknowledging its potential to open back doors that can harm individuals, businesses, and societies. To address this tension between the helpful and harmful potential of data, this Report calls for a new social contract that enables the use and reuse of data to create economic and social value, ensures equitable access to that value, and fosters trust that data will not be misused in harmful ways— World Development Report 2021: DATA FOR BETTER LIVES

 The list of these challenges is quite long and formidable: denial of right to work, non-recognition of women’s work, non-payment for work done by women, denial of a fair wage, gaps in the legislation needed to protect women’s rights, non-implementation of laws that have already been enacted, non-recognition of informal-sector workers, and, above all, prevalence of an environment that perpetuates and reinforces gender inequality by the day—I A Rehman inFor women empowerment

Those of us who work in the tax justice space speak a lot about fairer taxation— ensuring that the burden for paying tax falls proportionately on those who are most able to pay. This is essential in developing societies and a key enabling factor for these countries to reach their potential. Used well, tax policy is the most sustainable financing instrument to attain UN SDG 10 of reducing inequality within and among countries. Tax policy can reduce the inequalities that diminish the capacity of women to lead the lives they want and be independent—How to tax for gender equality

The World Bank four years back in its report, ‘World Development Indicators (WDI) 2017’, showed that “one-third of Pakistan’s population continues to live in poverty, corresponding to some 50 million poor individuals. Children and women (out-of-school/working), disabled, and potentially the elderly, are the most vulnerable groups of poor.” Out of these, not less than 15% live below $1.90 per day, which was categorised as extreme poverty. Millions suffering from hunger, malnutrition and diseases and Covid-19 and its variants are even in 2021 deprived of basic facilities of life. What makes the situation more painful is the fact that overwhelming majority of members of national and provincial assemblies and senators pay laughable amounts as income tax when compared with their lavish style of living (Tax Directories of Parliamentarians for tax year 2013 to 2018 testify to it—thereafter no directories are issued for tax year 2019-20 as elaborated in PTI, FBR & tax directories—I, Business Recorder, April 23, 2021 and PTI, FBR & tax directories—II, Business Recorder, April 24, 2021).

In Pakistan, taxpayers’ money is not spent for the empowerment of women and eliminating rising inequalities that were explained in great detail in Dealing with rich-poor divide, Daily Times, May 24, 2021.

The huge chunk of taxes collected are wasted and/or abused mercilessly on debt servicing, defence and for giving tax-free extraordinary perks and perquisites, and/or concessional plots and unthinkable luxuries enjoyed by the privileged classes—see details in book co-authored with Huzaima Bukhari, Pakistan: Historic & Critical Review (PIDE, 2020). It can be downloaded freely from: https://www.pide.org.pk/pdf/Books/Tax-Reforms-in-Pakistan-Historic-and-Critical-View.pdf

In democratic countries, people receive many amenities in lieu of taxes paid by them. They get good facilities of health, education, justice, transport, housing and pension benefits, just to mention a few. In Pakistan, taxpayers are harassed, condemned and citizens are denied fundamental needs (universal entitlements). Therefore they find it worthless, rather irritating, to pay to the government, though Pakistanis are still among the leading philanthropists of the world.

The donors and lenders, UK-aid, International Monetary Fund (IMF) and World Bank (WB)) mention the irritating dimensions of our tax system and non-availability of public services but our rulers pay no heed. There is no dearth of studies mentioning that the ruling elites—real beneficiaries of tax money—also thrive on funding/aids/grants/loans extended by all lenders and donors. In this way, the parasitic elites get more money for further luxuries, personal gains and/or wastage but burden the poor Pakistanis with more regressive and oppressive taxes. For detailed discussion, see Chapter 14 [World Bank and tax reforms] of our recent book,Pakistan: Historic & Critical Review (PIDE, 2020).

When all the lenders and donors criticise Pakistanis for not paying taxes, they conveniently ignore that according to Pakistan Telecommunication Authority (PTA), the total number of cellular subscribers as on August 31, 2021 was 184 million (84.16% teledensity), out of which 103 million were 3G/4G subscribers (47.05% penetration), 2 million basic telephony users (1.13 teledensity) and 106 million broadband subscribers (48.37% penetration). Not less than 100 million cell users (many have more than one number) were paying advance/adjustable income tax of 12.5 (reduced to 10% from July 1, 2021).

The Federal Board of Revenue (FBR) in its Press release of July 1, 2021 claimed receiving income tax returns of 3.01 million. FBR should register all persons paying substantial advance income tax but not filing tax returns to bridge the huge gap as suggested in Restructuring of tax system: a blueprint, Business Recorder, May 7, 2021.

Legislature must stop taking 10% income tax from all mobile users who pay 19.5% sales tax on services in their respective provinces (for users in Islamabad Capital Territory, 16% federal excise duty (earlier 17%) whereas there should be free internet service at public places. It is worthwhile to mention that even the poorest of the poor and non-working women are subjected to these oppressive taxes.

Taxpayers and people of Pakistan are justified to pose a question: Can you please first identify the real beneficiary of taxpayers’ money and cost to national exchequer in providing free perks to militro-judicial-civil-complex and public office holders in the form of palatial residences, army of servants, expensive cars, golf courses, rest houses, foreign tours, banquets, etc? The concerned citizens rightly argue that the government should first stop the colossal wastage of funds and then debate the issue of tax-to-GDP ratio.

The so-called reforms agenda of donors/lenders and our ruling elites, including the present government, will never include actions such as empowerment of women, looking after the poor through parting them vocational training and make them part of productive labour force. Simultaneously, there is no will to monetize all perks and benefits available to powerful militro-judicial-civil complex, unscrupulous big businesses paying millions to fund political parties rather than paying due taxes—the worst reflection of elite capture.

There is lack of political will for commercial utilisation of expensive properties occupied by elites that can bring enormous funds to the government to retire debts as well as future savings of billions and regular income as explained in detail by Dr. Nadeem Ul Haque, Vice Chancellor of Pakistan Institute of Development Economic (PIDE) in his remarkable book, Looking Back: How Pakistan Became an Asian Tiger by 2050 ( KITAB, 2017).

Paying taxes, people say, is meaningless and unjustified when the State is indifferent towards public welfare, empowerment of women and reducing income/wealth inequalities. They legitimately ask why for the last many decades, the elites have been blatantly showing apathy towards their fundamental needs. Our rulers live lavishly while Pakistan ranks among the lowest countries in Human Development Index (HDI). Millions of children are out of school in Pakistan in gross violation of Article 25A of the Constitution of Islamic Republic of Pakistan—see detailed judgement of Supreme Court reported as 2014 SCMR 396 re Petition regarding miserable conditions of schools.

Organisations like HRCP, Oxfam Pakistan, ‘Make Tax Fair’, ‘Pakistan Tax Justice Network’, ‘Tax Justice Coalition’ and others must campaign for a just tax system ensuring social services and economic justice to all, help empowering women and promote enrolment of female student in primary and higher education in rural areas and improve their skills to be part of work force. The complete model to implement this agenda is given in Pakistan: Historic & Critical Review (PIDE, 2020).  

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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, IT, intellectual property, arbitration and international tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation.  He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He isVisiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).

He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition,  Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).

The recent publication, coauthored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions

available at:  https://www.amazon.com/dp/B08RXH8W46

He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequelPakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.

Twitter: DrIkramulHaq

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