Taxes again
July 23, 2012
Rarely do we lead the world in anything, but the latest report by the World Bank (WB) on our ramshackle tax system reveals that at current levels the tax ratio is the lowest in 35 years – and one of the lowest in the world. Successive governments since the early 1990s have tried and largely failed to reform the tax system. With an election possibly later this year or early next year the WB opines, rightly, that the government is not going to do anything by way of introducing any tax reforms in the foreseeable future. There is tension between the centre and the provinces about the framework of the General Sales Tax (GST). Weak governance with the PPP heavily dependent on the support of its coalition partners and ‘instability’ at the top of the Federal Board of Revenue (FBR) are factors in the picture of failure. There is a lack of continuity at the senior and middle management levels of the FBR, as officers are moved to make way for political appointments, sometimes of people from outside the tax milieu without any specialist knowledge or relevant experience. Such is the regularity with which seats are shuffled that it is difficult not to conclude that the government is ensuring that reform is staved off by maintaining a significant level of insecurity within the FBR. It is also of note that this government has but rarely of its own volition introduced tax reforms; it has been at the behest of an external agency such as the World Bank. Left to their own devices our legislators would have taxation eternally on the back burner.
Our taxation structure is narrow and skewed, the legislation excessively complex and lacking transparency. Tax evasion has been elevated to the status of a national duty, and only those with income tax deducted at source – which includes salaried government employees – pay up willingly. To be scrupulously fair, the government of the day in 2004 approached the WB and asked it to devise a tax administration reform programme (TARP) – which it did. The programme ran until December 2011 but largely failed because the government refused to take the medicine it had asked be prescribed for its ills. Things started well with the granting of greater autonomy for the FBR, we had the FBR Act 2007 and a commitment to confirming the FBR chairman for three years; but they started to slide badly in 2008. Over the seven years of the TARP project there have been four chairmen of the FBR which has gone down like the proverbial lead balloon. Ultimately the government has been unable to forge the political consensus that would create an environment in which the reform of taxation could go ahead. Given the nature of our politics at federal and provincial levels it is unlikely that such a consensus is going to emerge in the near term. And we will continue to be close to the front of the race to be the world’s least-taxed nation.
The right to know
July 23, 2012
While scoring very high on corruption and poverty indices, when it comes to the promotion and protection of rights taken for granted in other countries, such as every citizen’s fundamental right to know how the government is functioning, Pakistan fares very low in almost all rankings. According to a recent study jointly carried out by Canada-based Centre for Law and Democracy and Spain-based Access Info Europe, Pakistan is among the last 20 countries in the Global Right to Information (RTI) rating, ranking 72 out of a total of 90 countries surveyed, with neighbouring India coming in at third place and other countries in the region, such as Nepal and Bangladesh, also doing exponentially better than Pakistan. Even Mexico, otherwise considered very hostile to journalists, has been ranked seventh while Ethiopia, another country described unsafe for journalists, has earned the tenth position. Yemen too boasts of more liberal access to information than Pakistan, ranking 20th on the index. This despite the fact that the Freedom of Information Ordinance 2002 was promulgated here as far back as October 2002, allowing citizens access to public records held by any public body of the federal government including ministries, departments, boards, councils, courts and tribunals, and stipulating a time frame of 21 days for the bodies to furnish information. Especially after the passage of the 18th Amendment in 2010, the crucial Article 19-A was inserted in the Constitution, making the right of access to information a fundamental constitutional right and leaving no more room, whatsoever, for prevarication and hindrances in the process of providing citizens with the information they deserve.
Citizens’ right to information is also a fundamental human right affirmed in the Universal Declaration of Human Rights. However, here in Pakistan, Sherry Rehman’s Right to Information Act has been floating around from one standing committee to the next for the last few years, with no logical end in sight. This is unfortunate, given that a working right to information law could enable people to ask important questions about the government and rightly unearth fraud, corruption and poor governance. Legislation on the right to information is part of the fundamental task of redistributing power in any democratic framework. While other countries in the region are redefining and reinventing vibrant forms of democratic participation, Pakistan keeps moving further back in time, incrementally isolating its citizens from the processes and practices of governance. This must change. Because citizens pay for expenditures incurred by governments through taxes, they have a right to know what is being done with their money. Most importantly, officials do not just create information for their own benefit, but for the benefit of the public they serve, as part of the legitimate and routine discharge of any government’s duties; hence they cannot keep information from citizens. Our guardians of democracy – if they really are who and what they claim to be – must strive to give people the fundamental right to freedom of information, which is the cheapest, most efficient way to hold politicians and public services to account. Unlike the millions wasted by the government due to corruption, inefficiency and bad decision-making, right to information is a democratic and powerful tool that could give every citizen a right to hold officials to account at virtually no cost, and with the potential for massive savings.