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Monthly Archives: November 2014

Taxation: One of Pakistan’s weakest links

Published: October 23, 2014

Out of a total workforce of 58 million, less than 2 million are registered taxpayers. CREATIVE COMMONS

KARACHI: The index might offend the overly patriotic but is hardly surprising.

Pakistan is one of the weakest countries in the world, and now has an index assigned to it — fragile state. Pakistan ranks 10th in the Fragile States Index released by the Peace Fund earlier this year. India ranks 81.

According to another report, “Fragile States 2014: Domestic Revenue Mobilisation” produced by the Organisation for Economic Co-operation and Development (OECD) in February, the cause is a non-functional domestic revenue system — the failing tax system.

“For almost 68 years, no one has gone to jail in Pakistan for not paying their taxes,” said Dr Vaqar Ahmed, deputy executive director at the Sustainable Development Policy Institute (SDPI). “Our people have a tendency to not pay them. The informal sector doesn’t get itself registered. There is no mechanism to keep a tab on the income of micro-retail. Salons, private tuition centres, tax solicitors, software developers – how many of them pay taxes?”

With a narrow tax base, development continues to suffer. “With a continuously declining GDP, our development relies solely on loans,” said economist Khurram Shehzad. “The country, therefore, continues to be under heavy debt. One of the most charitable nations in the world refuses to pay taxes due to a trust deficit on the government.”

Bleak future 

The Pakistani government spends a meagre 0.7% of its GDP on health, which is less than half of what other governments in lower middle-income countries spend. National expenditure on elementary education is less than 2%. The OECD reports that progress towards the Millennium Development Goals (MDGs) in fragile states is expected to be much slower compared to other countries, and in five years, extreme poverty is expected to be concentrated mainly in fragile states. Pakistan, thus, has much to worry about.

Money matters

Accountable tax systems are of greater importance in fragile states compared to other countries. While domestic revenues help countries get rid of aid dependency and building mutual accountability between citizen and state, as the report states, Pakistan’s Federal Board of Revenue (FBR) collects a mere 9% of Pakistan’s GDP. This is among the lowest rates of tax collection by a federal government in the world, excluding oil-producing countries, according to a study of tax reforms in Pakistan by the SDPI.

“With a non-trustworthy system, people have no incentive to pay taxes. There are too many loopholes in the system due to which the richest end up paying the least tax,” explained Shehzad.

Preferential treatment

Exemptions made by the government to certain taxpayers are provided in the tax laws, and through a ‘Statutory Regulatory Order’ (SRO) issued by the FBR. To date, the FBR has issued 1,920 SROs. An estimated revenue leakage of 3 to 4% of GDP is due to taxpayers not paying taxes on time, and revenue loss resulting from preferential treatment.

These losses, in 2012, were estimated at between Rs600 and Rs800 billion, and if tax evasion is added, total loss roughly equals the total government borrowing each year.

The business community also seems to disagree with how the SROs are used. Recently, the business community of Rawalpindi unanimously rejected SRO 608, demanding that the government withdraw it within a week. The demand came a day after the Directorate of Customs Intelligence and Investigation unearthed evasion of duties and taxes of Rs775 million by importers who misused SRO-1125 of 2011.

The tax net

“There is immense discrepancy in sources of taxes. Tax we earn from the agriculture industry is non-existent,” said Shehzad. If Dr Vaqar is to be believed, this situation is not going to change anytime soon. “In a country where a quarter or more of our national income comes from agriculture, its income is outside the tax net. The feudal benefits from this – the same feudal who is sitting in parliament. Therefore, every time this matter is taken up in parliament, it is silenced,” said Dr Vaqar.

A narrow tax base

• Out of a total workforce of 58 million, less than 2 million are registered taxpayers

• In 2012, only 0.7 million people actually paid income tax. This comes to 2 per 100 employed

• Of all the lawmakers in the National and Provincial Assemblies, 61% did not pay taxes in the year they contested elections (2013)

• 51% of senators and 62% of cabinet ministers did not file tax returns

(Source: SDPI)

Fragile states – the vulnerability factors

•  A fragile region or state has weak capacity to carry out basic governance functions and lacks the ability to develop mutually constructive relations with society

•  Fragile states are more vulnerable to internal or external shocks such as economic crises or natural disasters

•  The proportion of young people in these states is approximately twice that in non-fragile countries

•  The populations of these states are growing roughly twice as fast

(Source: OECD)

Published in The Express Tribune, October 23rd, 2014.

What is Abdul Sattar Edhi going to do now?


Published: October 21, 2014

And so it goes. Edhi abbu he is. A father figure for Pakistanis. PHOTO: Screen shot from ‘Seerat 4: Philanthropist – Abdul Sattar Edhi – by Ali Kapadia’

There’s something about Abdul Sattar Edhi that makes Pakistanis feel safe… almost protected, like a child feels with a parent around. He is old and frail and sickly. But he is there. He is alive. And till he is alive, we have hope. We have hope that goodness prevails, and that there exist those we can look up to.

With Edhi around, we have an elder.

This August 14th, I happened to celebrate Pakistan’s Independence Day with children from the Edhi home who were attending an event held for them.

“Edhi abbu got us these clothes for Youm-e-Azadi,” said a 14 year old, smugly flaunting a bright green shirt and white pants and shoes, the pants with bits of grass and soil smudged on to it as the kid was sitting on the lawn.

And so it goes. Edhi abbu he is. A father figure for Pakistanis.

The man is one person the country’s leftists and rightists and centrists agree on. Thus, Edhi has done more than raise abandoned babies and feed the hungry and lift laawaris laashain. He has not built bridges – he IS a bridge in an otherwise exceedingly polarised society. Pakistanis are like estranged siblings a lot of times; we are united in our gratitude towards Edhi abbu.

The common responses to Edhi and his staff being held on gunpoint and looted of gold and cash worth around Rs 30million had reactions that went like this:


“Don’t know what to say.”

“Edhi hum sharminda hain.”

“ Edhi Sahab we don’t deserve you.”

“May those who did this to you rot in hell.”

The most heart-wrenching was him saying in an interview,

“I am heartbroken.”

The nation’s intelligentsia and literati are still reeling from the post-Noble Prize discussionsover whether Malala deserved the prize or not. And those who were from the Malala camp saw this as an opportunity to even scores with those who had dared to question the young girl’s win and had dared to say that Edhi would have been a more deserving candidate.

“Why don’t all those who wanted Edhi to win make up for his loss now?” was a common sentiment on the vent-ground called Twitter.

But then, what do we expect from a people that have been through what Pakistanis have?

The marauders, mind you, were a sample part of the whole. And the whole has suffered, and continues to. There is corruption, insecurity and a lack of governance and that is costing us lives, honours and sanities.

A few examples stating the obvious: we lose 92000 children annually to Pneumonia because they do not have access to a vaccine that can save them. In the last one month we have seen40 plus new cases of Polio. In 2013, 1600 plus Pakistani women were killed in the name of honour. Just last month, a girl withdrew charges of gang rape against a minster’s sons. Ourmaternal mortality rates are almost the highest in the region. Some one million IDPs have dimming hopes of returning home before harsh winter sets in. Our mothers kill their childrenand commit suicide as the hunger is too much, and at the other end our affluent class bathes in wealth. Our politicians continue to pledge service to the masses in public, and continue to spew powerful narratives that fuel anger. Ironically, Bilawal Bhutto Zardari’s Karachi jalsaand the promised historic speech was hours ahead of Edhi Sahib being looted, and was a case in point.

We are an angry, intolerant nation. And those dacoits were a part of us. Why, then, the naive surprise? They saw money, and they decided to loot it. It was may be too trusting of Edhi Sahab to think they would not do this to him. He should have learnt a thing or two from our political leaders and kept the money somewhere no one can touch it. Money is money. It’s tempting, everyone wants it, and is out to get it. And in this quest, they are not even going to spare a man who is an emblem of humanity.

So what is Abdul Sattar Edhi going to do now?

Well, he is going to do exactly what he has been doing. He will pick up the pieces of a broken heart, and continue to try and put in his share of healing the aches and pains of humanity, as a good Pakistani and as a human par excellence. If we have any respect for him and have learnt anything from him, then we must do the same. We cannot let hope wilt, and cannot become jaded cynics saying “nothing’s going to get better”.

I can make myself better, can’t I?