Fixing the economy requires shared pain

While many economic indicators have shown that the national economy contains significant potential for improvement, progress is slower than necessary to keep pace with the growing population and needs of the country’s poor. Shahid Javed Burki examines the economic stress in the country and notes that one of the largest obstacles to improvement is political parties protecting their base from the possibility of tax increases.

There is no other way out of this quandary than for the government to increase its resource base. But the tax system is proving hard to reform. The various constituencies that support different political parties are not prepared to see an erosion of the incomes of their base that would inevitably result in the short term with higher taxes. The ruling Pakistan Peoples Party has a strong base of support in rural Sindh and does not want agricultural incomes to be taxed. The Karachi-based Muttahida Quami Movement does not want urban services to be taxed. The Pakistan Muslim League (Nawaz), which governs Punjab and is the largest opposition party, does not want the documentation of the merchant class, which has successfully resisted it. Without documentation, it cannot be brought into the tax net. Politics, in other words, is pulling down the economy. And it is only politics that will bring about an improvement in the economy.

The solution to this impasse will not be easy, but taken together there is a possibility. To succeed, each of the political parties must put the good of the nation above their own drive for power and political gain. This means that every constituency must be asked to share the sacrifice of taxes so that the economy can be improved and programs funded to alleviate the suffering of the poor and hopeless.