Distractions come and go, but one thing is constant: The need to seriously address the nation’s economy. It’s easy to blame feudal politicians and they very rich for state of the economy. But as 700,000 individuals are opening their notifications from FBR instructing them to start paying taxes, we should be asking, “what of the other 99.7 per cent of citizens?”
The economy is a constant source of political battles, and as we approach the 2013 elections it will become even more so. Increased petrol prices, the fear of inflation, debt financing, and the price of food are constants in the political discourse. As the party currently in power, PPP takes a lot of complaints for the state of the struggling economy. But even PPP critics recognize that the problem is one that is not so easily solved as simply as replacing the present leaders.
Dr Pervez Tahir, former chief economist of the Planning Commission, criticises the government’s lack of focus on the economy, “despite [PPP’s] edge over the other parties in its concern for real economic issues”. Dr Maleeha Lodhi, also a regular critic of the present government, admits that the government is probably doing the best that it can given the political circumstances.
The new taxes have been imposed through presidential ordinances while the removal of the GST exemptions has been effected through SROs (statutory regulatory orders). This may have been the only course available to the government after the collapse of its talks with the PML-N and resistance from its coalition partners.
The good news is that many economic indicators are showing positive signs. Services exports surged almost 56 per cent since seven months, recording $3.424 Billions during July-January period, and foreign exchange reserves reached an all time high of $17.38 Billions.
The bad news is that economic growth is being held back by a culture of tax evasion in the country. Huzaima Bukhari and Dr Ikramul Haq suggest that the solution is to follow the model of Nigeria and Philippines and institute forced repatriation of funds from countries like Switzerland where money is being hidden. While repatriation of hidden funds is not a bad idea, it’s not enough. This would only provide a temporary economic boost and not change the regular practise.
The fact is that sustainable solutions to the economic situation require sacrifice and a shift in the popular thinking. We need to change the culture of tax evasion in the country.
The culture of tax evasion is not unique to Pakistan. The same problem exists in many developing countries including Bangladesh where tax-GDP ratio is only 9 per cent. And, despite the popularity of blaming tax evasion on the rich, tax evasion is a problem that is also widespread in the middle class. Again, this is not unique to Pakistan, but has been found in India also.
The point is not that the rich should not have to pay their fair share of taxes, but that we all should. No more excuses.
FBR collected Rs1 Trillino in the first three quarters of Fiscal Year 2011 – a 12.8 per cent increase since one year. This is still below targets, but it’s a step in the right direction.
Now, as the nation faces petrol price hikes, we need to be willing to face the music and pay our fair share. Certainly the price hikes will be felt, but we must examine it in context of the greater economy and not the immediate circumstance. Consider the statement of PM Gilani today.
On Friday Gilani told lawmakers the latest price increase was necessary because the government could not control rises on the international market.
“We have given 35 billion rupees (411 million dollars) subsidy on petroleum prices so far and our taxes on petroleum products are the lowest in the world,” Gilani said.
He urged the public to conserve electricity, gas and petrol “in the national interest.”
I have written before that loosing our country from the conditionalities and obligations that come with foreign aid requires “making the sometimes uncomfortable decisions required to solve” the nation’s problems. We can strengthen our nation and our security not by blaming others for our problems, but by investing in ourselves. There is a saying that “taxes are what we pay to live in a civilized society”. If we want to see Pakistan rise to its potential, we should not avoid paying taxes, but pay them willingly. That is the true sign of patriotism. Of course, there’s another saying which is “you get what you pay for”. Keep that in mind the next time you’re complaining.