WASHINGTON DIARY: Tax troubles
by Dr Manzur Ejaz, USA
Courtesy: Wichaar.com, September 29th, 2009
With taxable classes not paying, indirect taxes have been used to skim people who are least capable of paying anything to the government. Even then, the gap remains wide and ruling elites travel the world to beg, borrow, steal or blackmail.
Imagine: Fairfax County of Virginia, the second richest county in the US, is soon going to shut down its entire public school system. The county government has warned of water shortages and sewage blockages, and streetlights may have to be removed from roads and parks. Road repairs are also being put off permanently and electricity companies have issued a warning that there may be a disruption in supply due to failings in the rest of the infrastructure.
Such drastic actions had to be taken because the citizens have refused to pay property taxes, water and sewerage charges. The sales and various indirect taxes currently collected hardly pay the salaries of county employees. Federal resources are mostly consumed by the defence and security forces. Therefore, Fairfax County may begin rapidly deteriorating and become like Pakistan or countries in that league.
Nothing of this sort has happened yet and Fairfax County remains one of the most desirable places to live. However, it can happen if people of this county start behaving like Pakistani households when it comes to paying taxes. It is sickening to see that not many people in the media and civil society talk about the real source of Pakistan’s economic woes and continue speculating if the Friends of Democratic Pakistan will underwrite Pakistan’s bills or whether some other donor agencies will come to the rescue.
During the last week I was asked over and over as to what amount the Friends of Pakistan would commit in their New York meeting. My response has been that even if they throw in a few billion dollars, will it solve Pakistan’s economic problems? Have billions of dollars in foreign aid and loans pulled Pakistan’s economy out of its ever-degenerating state? Everyone knows that the answer is an emphatic ‘no’.
It does not take a genius to figure out that if the users of services of a city, county or country do not pay their due share, the services will cease to exist. All the services provided in Fairfax County are mostly paid by property and sales taxes and fees for different licenses or permits. The county does not seek foreign aid or any help from other counties. If users stop paying taxes, the entire structure of services will collapse. Lahore, Karachi or my village, Burjwala, are no different.
Pakistani households do not relate the supply of services to paying taxes. They equate taxes to government attempts at robbery, and provisions of basic services as the government’s duty. They never bother to consider how the government is going to provide services if no one pays for them.
The word ‘government’ is a kind of misnomer in this context. The people who constitute the government are no different from the rest of the citizenry. They are the worst when it comes to paying the taxes. As a matter of fact, they use their government power to avoid taxes. Therefore, the political class that rules the country in turns is no different from the common tax-avoiding businesses and individuals. In fact, due to such behaviour they have left themselves with no moral authority to cultivate a culture of tax paying and accountability.
With taxable classes not paying, indirect taxes have been used to skim people who are least capable of paying anything to the government. Even then, the gap remains wide and ruling elites travel the world to beg, borrow, steal or blackmail. Jihad in Afghanistan and then elimination of the Taliban and other jihadis were good ploys to extract foreign funds to fill revenue gaps.
But it is always temporary and cyclical. For some years, the United States and other rich nations pump in money to safeguard their specific interests and the economy seems to be moving. However, when these rich nations feel that Pakistan has lost its utility, the economy returns to shambles. The cycle continues with no end in sight; and will never end unless a system of tax collecting and accountability is not put in place. However, Pakistan’s current political class will not do the job. Therefore, a change of the entire political system needs to be on the agenda.
The writer can be reached at email@example.com