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A SNAPSHOP OF TAX CULTURE IN PAKISTAN

  • Dr. Shahid Wazir Khan
  • Dec, 2017
  • 100
  • Economy

We can safely presume that in current scenario no government whether political or military can deliver to the masses.

Tax payments are the cost of living in a civilized society. A country’s Tax to GDP ratio is a reflection of responsible citizenry in a modern state. In democratic dispensations, taxation and accountability works in tango. Taxes are compulsory levy which people never liked to pay but are essential for economic development and planning. A vibrant progressive taxation system and a robust mechanism of accountability are the two pillars of good governance. The primary objective of any political entity is efficient public service delivery, which includes; education, health, physical infrastructure, efficient and cheap energy resources etc. which require monies as there is no free lunch in economics. Failure to provide these services results in Red Card for a ruling party in next general elections.

Since 1947, this indicator has been self-explanatory in Pakistan’s politics. Neither political party was reelected as none of them was successful in meeting people’s expectations. Whenever masses got an opportunity to change a government they did it. Military takeover in Pakistan can be explained under the same principle, as people accepted them without any resistance. People had hopes that military junta could yield better results, but were being repeatedly disappointed. The political pawns chosen as political veil to their illegitimate rule had vanished from the political scene in much less time than expected.

In 1973, Zulfikar Ali Bhutto of PPP formed government, Pakistan had a tax to GDP ratio of 11.9 (Data Source: World Bank). These revenues had to meet the requirements of almost 65 Million people. Today UK, France, Thailand, Italy and Tanzania have populations of approximately 60 Million with tax to GDP ratios of approximately 34.4, 47.9, 17, 43.9 and 12 respectively. Bhutto’s slogan of “roti, kapra or makan”, the essential ingredients of a welfare state, could not be materialized without increasing the tax to GDP ratio in Pakistan. The miscalculated process of aggressive nationalization by PPP led to a dip in the tax to GDP ratio and in 1975 Pakistan’s TAX to GDP ratio was 10.8. In 1977, when Gen Zia stepped via illegal coup de etat, Pakistan Tax to GDP ratio was 11.

A welfare state for a population of almost 60 Million requires a Tax to GDP ratio of in between 30-45 and Pakistan in 70’s lagged far behind that ratio. So Mr. Bhutto due to extreme shortage of financial resources failed to deliver on his promises. In the absence of an alternate political leadership, people accepted the totally illegitimate rule of Zia ul Haq as they wished and hoped that army, under the veil of Zia’s brand of Islam, will bring socio economic justice in Pakistan. Zia ruled Pakistan for almost eleven years. During these eleven years, Pakistan’s population increased from 68 Million to almost 100 Million. The tax to GDP ratio during this period fluctuated between 11 and 13. The only comparison in this population bracket can be made with Philippines and Egypt with a population of 103 Million and 96 Million respectively. Egypt has a Tax to GDP ratio of 15.8 whereas Philippines have achieved the target of 14.4.Interestingly both countries lack democratic norms. Egypt remained under one party rule for more than twenty years. Then, democracy restored for a short period of time and then again military overturned the democratic system. Philippines’s history is also a story of political instability and military interventions because of a failure to develop a robust taxation system to meet the needs of its growing population.

Zia’s military rule was unable to bring socio economic equality in Pakistan, as promised by him at the time of his coup.  Strong taxation processes are required to bring economic equality. The state taxes the income of rich people and spends those revenues for education, health, infrastructure, employment generation and other basic needs of the people. These mechanisms help governments in bringing people out of the poverty trap. Failure to tax the rich increases the proportion of socio-economically marginalized people and erodes state’s sovereignty, thus depending more on multilateral and bilateral donors for its sustainability.  Pakistan suffered both these ailments during the period. The disappointment, people faced during military era from 1977-88 turned their faces towards the democratic systems and Pakistan experienced the movement for the Restoration of Democracy (MRD).

PPP again came to power in 1988. Before deliberating on the democratic period from 1988-99, one noteworthy point is that Zia and military elite who controlled the reigns of Pakistan for eleven years remained unaccountable for their de...

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