Pay Your Goddamn Tax!
By Ziad Bashir
The Author is a sophomore at Lahore School of Economics, and Chief Editor of Ideas Evolved. He had the inspiration to write this article during his midterm examinations when his mind is usually unable to focus on the rote learning expected of him to get good grades. Still though, he’d appreciate all the good luck wishes he can muster for tomorrow.
Ideally, tax collections are supposed to form up to 40% of a country’s total GDP. For Pakistan, this figure has been approximately a pitiful 10% for almost forever. This is a direct consequence of tax evasion. And who evades their tax?
Zardari? Yes. Prime Minister Gillani? Yes. *A list of other politicians that we love to (rightly) demonize*? Yes, those bas**rds!
BUT also from among us, those with salaries and disposable incomes far exceeding the needs and yet, finding ways to save ourselves from taxes in one way or the other. Of course, I know of some admirable Pakistanis who pay every penny of the tax that is their due, but the fact that the tax Pakistani government manages to collect is such a small share of the total GDP, is proof that many of us or those around us, do not. So why do we protest the rising fuel prices that the government isn’t able to subsidize for the tax-evading Pakistanis? Why then do we protest to the poor farmer not getting decent procurement prices from the government when the non-poor do not even pay the taxes? If we do not pay the taxes to the government, how would the government pay the farmer even if it had an efficient and effective system in place? (Actually developing an effective system also requires monetary investment from government but since we don’t pay the taxes, the joke’s on us.)
How is there so much tax evasion, you ask?
Actually its tax evasion, as well as tax EXEMPTION that plagues the system. Pakistan’s ambassador to the US, Abdullah Hussain Haroon recently said in an interview that mismanagement and corruption is part of the deal called Asia. And that’s the case here as well. Apart from the irrational tax laws, Pakistan has been unable to even properly document all the property and businesses in this country – to the pleasure of many big guns who benefit from this (for obvious not-so-noble reasons, there is a reluctance to accept tax invoicing of inputs and outputs by manufacturers – generally). The implementation of VAT would have been a step towards taxing THESE undocumented activities and holdings- but we believed the TV instead when they said the poor will have to pay additional tax – but 1) they already do, indirectly, and 2) there is an argument that it would not mean additional tax- in an over-all context (opinions welcomed in the comment section). We are SO gullible that we almost deserve what we get.
Lack of accountability is another factor. Taxation officers openly ask for bribes in return for sweeping the records under the carpet – which many local businesses gladly pay. This is a common tradition practiced openly (ask anyone who’s had had to visit to make such dealings) and that makes it even more ridiculous. Such cases are among the reasons I am writing this article. How do we expect to address the issue of various government institutions failing to do their jobs properly when such illegal transactions are taking place right under our noses? If we cannot stop this blatant theft of public money – what CAN we do? It is my aim here to bring this issue to greater light. We cannot stop the drone attacks because foreign policy is beyond the common man’s reach – but THIS isn’t.
We can blame the system but in coming years, we’ll be joining the system. My friends, some of you will be employees of the FBR, in a decade or two you will be in a position to seek this bribe too, and when you are – please don’t. They earn millions from the corporate goldmine here. Make them pay their due.
Moving on to the “irrational tax-laws” I mentioned earlier. In Pakistan the minimum taxable income per year is Rs.3 lac (1 lac = 100,000). This might not be a lot for annual income (but enough to keep you comfortably above the poverty line), but consider the fact that we only owe the government 0.75% of that in an entire year. The devil that we have come to know as IMF, recently suggested that Pakistan should focus on taxing the rich. Well, the devil was right. This tax base needs to be widened in order to bring a greater number of people into the tax bracket. In short, the solution: tax the rich.
Food for thought: If you earn a salary of Rs.350,000 (3.5 lac) in Pakistan, the total tax that you owe the country in a year is Rs. 2,625/= ONLY! (Exact ratios are at the bottom of this article)
The Pakistan that I love so much, abundant in resources – and full of idiots!
Another problem: income from agriculture is non-taxable. The rationale offered is that since agriculture employs mostly the poor class of Pakistanis, it should not be taxed at all. It’s a shame that they are able to actually get away with such arguments. An actual poor farmer is by no means able to earn anything close to the minimum taxable amount of Rs.3 lac. But those that have enough land to do so are not poor, yet they are exempted from paying the tax by this law. I am referring here to the landlords having acres and acres of land that they harvest every year, earning millions; yet, not having to pay a single dime to the government in taxes. It’s a shame that they are actually protected by law.
There are more examples, but since I cannot list them all, I listed those that are easiest for us to understand (and I confess, some examples even I don’t fully comprehend- sue me)
The purpose of this article is to inform the reader (the young demographic of this particular blog) about something that is not entirely unknown to them, yet not readily on top of their minds.
Pakistan’s military expenditure alone consumes up to 24% of Pakistan’s GDP and yes this has been used by many of us as an excuse to yell conspiracy but it has been argued by some analysts that this amount is a necessity (at least as long as issues like Kashmir, Siachin, and Rann of Kach remain). If you are about to jump to tell me that you think we should cut the military budget – I say, alright. But sir/ ma’am, before you take the drastic step of cutting Pakistan’s defence budget – fix the relatively simpler taxation problem. Thank you.
For the reader’s benefit:
Yearly Slab Rates of Taxable Income of Salaried Class in Pakistan Budget Bill 2010-11
1. Income < Rs.300,000, Tax Rate: 0%
2. Rs.300,000 < Income < Rs.350,000, Tax Rate: 0.75%
3. Rs.350,000 < Income < Rs.400,000, Tax Rate: 1.50%
4. Rs.400,000 < Income < Rs.450,000, Tax Rate: 2.50%