Talking taxes

Impression in the West is that Pakistanis don't like to pay taxes. Back in 2010, Hillary Clinton was the first Western official to publicly school their Pakistani hosts on making the rich pay. Perhaps taking heart from the cue, in subsequent years, British and EU officials also started bringing up this issue. In the face of a shrinking tax base, Western aid seemed as if it subsidised Pakistani elite and its privileges, they argued.
It seemed like another prodding in that direction when earlier this week the British High Commission in Islamabad, along with the Chevening Alumni Association of Pakistan organized a debate on "Tackling Tax Crisis in Pakistan". But this was no imperial lecture. Keynote speakers and panellists were all Pakistanis, carefully plucked from academia, business and government.
Arguably, in today's Pakistan, parliamentarians and business are under unprecedented scrutiny over their due taxes. But just the spotlight isn't enough. The crisis of taxation is such that over Rs600 billion in collectible taxes are not collected at all, and a comparable amount evaporates through tax exemptions, noted one of the speakers at the Chevening moot. More money is lost through some severely under-taxed sectors.
Chairman FBR listed in his keynote all thats wrong with Pakistan's tax system. He rightly pointed out that agriculture, transport, and retail & wholesale trade have historically had a tax contribution that paled in comparison to their respective shares in the GDP. Yet he seemed bereft of ideas to tackle this and other taxing issues. Or if he had a plan, he didn't share it with the audience.
But the chairman seemed relaxed over traders ongoing protestations over banking transaction tax. He gleefully suggested that the measure had hit where it hurt.
Creaky infrastructure and weak law and order force some businessmen to question the very basis of taxation in Pakistan, especially when there is high incidence of religious charity. The private-sector representative on the panel seemed really hurt when he said he wouldn't advise any businessman to come into the tax net. He was also miffed about taxmen harassing business for unseemly ends.
Earlier the FBR Chairman had bluntly said that this is all you get when tax proceeds are so little. Pay more taxes and then expect an improvement in public goods, he suggested. This circular argument surely seems like that chicken and egg debate. Captive taxpayers, like the salaried class, want their taxes to be better utilized. They have no option but to keep paying and hope on.
Despite the issues, it is good that a growing number of citizens now seem to understand the link between a prosperous Pakistan and everyone paying their fair share of taxes. The Chevening debate did a good service. Moving forward, folks must demand their political representatives to be more transparent in their tax filings. All three pillars of the state must also be open in this regard. There should be no sacred cows.
Business anywhere in the world is loath to taxes. Therefore, it is imperative to have a government that wouldn short-change public goods for private gains. The road to equitable taxation runs, arguably, through more democracy. For an illegitimate government would need to cut all kinds of deals to survive. But it is also apparent that taxation has never been an election issue in Pakistan. It is time for that to change!