Extreme concentrations of wealth also have a corrosive effect on our political process and our democracy. Just as tax cuts can be used to exacerbate inequities, governments can exercise their taxing authority to reverse these dangerous trends. Stepping up enforcement, closing loopholes, raising rates, and establishing new forms of taxation are all important levers to enable the government to achieve a more sustainable distribution of income and wealth”—Stephanie Kelton in The Deficit Myth
Every year in June, at the time of the announcement of budgets in Pakistan, many students pose a question, inquiring as to what should be the form and substance of an ideal pro-people budget at both the federal and provincial levels. The standard answer for years has always been that an ideal budget is one that has a long-term vision of prosperity by ensuring justice with all economic classes within the society. It must ensure growth with equality.
Such a budget, naturally, deplores the idea that citizens should remain trapped in abject poverty. The federal and provincial budgets need to focus on helping those lagging behind, enabling them as well as all those suffering from the financial hardships, due to lack of opportunities or high cost of living, to move up economically.
Fiscal policy, as part of budget and overall economic framework, must be used as a tool of distributive economics that must be indignant towards the crony rich holding the reins of political control through moneyed power, itself created through illegitimate sources. Taxation must be aimed at collecting taxes at a lower rate from the broadest possible base along with spending the same for public welfare programs, especially empowering people through education and facilitating free markets for employment generation.
Socioeconomic mobility in any society is not possible through cash handouts and charity. All our budgets, under successive governments, military and civilian alike, have been designed for benefitting the affluent classes. In other words, in an elitist economy, these are the “budgets of the rich, by the rich, for the rich.”
After announcement of every national budget, the instant reaction of most of the Pakistanis invariable has always been: “No relief for the masses.” The budget for fiscal year 2024-25 - the first of the coalition government of Pakistan Muslim League (Nawaz) announced on June 12, 2024 - is no different.
Every year, tax liabilities of the lower income groups and middle class salaried persons increase in utter disregard of the fact that their purchasing power has been dwindling because of double-digit inflation. It nullifies the impact of increase in salaries of low-paid government employees.
All employees, whether working in the public or private sector, bear the heavy cost of education and health, while governments conveniently violate command of Article 9 and 25A of the Constitution of Islamic Republic of Pakistan.
After 14 years of the Eighteenth Constitutional Amendment, more than twenty million children are out of school, that is the open mockery of the supreme law of the land promising that the “the State shall provide free and compulsory education to all children of the age of five to sixteen years in such manner as may be determined by law.”
More indirect taxes by the federal and provincial governments in the name of restricting fiscal deficits only result into burdening the poor and middle class. On the other hand, the rich and mighty get tax-free benefits of plots and perks to amass even more wealth.
The Supreme Court of Pakistan in its landmark judgement, Ms. Shela Zia and Others v WAPDA [PLD 1994 Supreme Court 693], internationally acclaimed, praised and widely quoted, aptly held as under:
The Court then examined Art. 9 of the Constitution of Pakistan, which provided that no person shall be deprived of life or liberty save in accordance with law. It explained that the word “life” could not be restricted to the mere existence from conception to death. A wide meaning should be given to it, which might include proper food, clothing, shelter, education, health care, clean atmosphere and unpolluted environment…
A large number of citizens throughout the country could not make a representation to seek an injunction in connection with this entitlement though, because of ignorance, poverty and disability. Therefore Article 184 of the Constitution, which provides for public interest litigation, could be invoked.
The poorest of the poor in the Land of Pure are compelled to have more children as a means to sustain themselves. Child labour is never addressed as an issue in any budget. More indirect taxes by the federal and provincial governments in the name of restricting fiscal deficits only result into burdening the poor and middle class. On the other hand, the rich and mighty get tax-free benefits of plots and perks to amass even more wealth.
In the last 16 years of democratic governments, the rich and mighty tax evaders and looters of national wealth have been given over a dozen unconstitutional tax amnesties or money withering schemes through which collossal untaxed assets, even those created through the proceeds of crimes, at home and abroad, were decriminalized, causing the loss of billions of dollars to the national exchequer.
About four million super-rich families, identified by National Database and Registration Authority (NADRA), unashamedly avoid taxes, thus, our economic woes continue unabated.
Federal and provincial governments are unwilling to sit together and take necessary steps to help revive businesses, help the poor by moving towards growth and then tap the real tax potential. The entire economic system needs restructuring to dismantle elitist structures.
Unfortunately, no serious effort has ever been made in Pakistan to devise rational economic and tax policies by governments for encouraging economic growth. The sole stress on irrationally-fixed revenue targets—with the main incidence on the weaker segments of society—has created an ugly perpetual fiscal mess.
The most damaging part of revenue-generating exercise is the high rate of sales tax on goods and services that were hurting the industry and hampering job creation even before the Covid-19 endemic. The persistent failure of successive governments to broaden the tax net, confiscate untaxed assets and ill-gotten wealth, spend public money prudently and remove socioeconomic imbalances has pushed Pakistan into a ‘debt prison.’
All of us are convinced by now that we need competence and not clichés. We have many able people with the capability and unshakeable determination to pursue a pragmatic reform agenda to transform Pakistan into an egalitarian state – a true social democracy, with justice for all, but they cannot get elected under the present system of electioneering, where parties give tickets to the electables that later exploit the system for self-aggrandizement. Nothing will change unless we have democratization of election process and reforms within political parties.
The persistent failure of successive governments to broaden the tax net, confiscate untaxed assets and ill-gotten wealth, spend public money prudently and remove socioeconomic imbalances has pushed Pakistan into a ‘debt prison.’
Federal and provincial governments are unconcerned about devising policies for social mobility and economic justice. Education has long been recognised as the most important single trigger of social mobility. Our budget makers never seem inclined towards promoting social mobility by taking tough redistribution policies, particularly benefitting those who are on the lower rung of the ladder.
There is no desire to introduce a skill-based productive educational system that is neither class-ridden nor discriminatory in any respect so that constitutional guarantees of equality and opportunities are ensured. Education in Pakistan has not only become a flourishing industry, but is also pathetically poor in quality and is definitely class-discriminated.
There is a complete lack of understanding of the perception of socioeconomic justice and social mobility on the part of our politicians and the result is that poor segments of society are condemned to remain ensnared in abject poverty because their children have no chance to progress as education is either not available to them, or is of no practical use.
Pakistan needs at least a 7-9% growth rate for a decade to provide three million jobs every year to young people alone. Our existing economic system is anti-growth.
Our economy will remain in this mess unless we change its focus and framework. Our federal and provincial budgets lack this perspective and are merely routine and ritualistic exercises of balancing the books. Pakistan needs meaningful redistribution policies that can uplift the downtrodden. This year too there is nothing in federal and provincial budgets towards this goal—like all previous ones, these are disappointing documents devoid of any vision for making Pakistan prosperous and self-reliant.
Federal and provincial governments must consider fundamental reforms for accelerated growth and social mobility, based on principle of Article 3 of the Constitution promising: “The State shall ensure the elimination of all forms of exploitation and the gradual fulfillment of the fundamental principle, from each according to his ability to each according to his work.” It requires eliminating all exploitative structures, providing equal opportunities for all citizens and ensure “from each according to his ability to each according to his work.” This is certainly the most important, but a forgotten promise!
Pakistan needs at least a 7-9% growth rate for a decade to provide three million jobs every year to young people alone. Our existing economic system is anti-growth. We need to replace these with the one mentioned in the Constitution and discussed above.
The economic system should be people-oriented and the cost of voluntary tax compliance must be less than the cost of evasion or avoidance. It is possible only through a national economic planning and an autonomous but competent and effective federalized tax agency that like Canadian Revenue Authority can ensure: “We collect money to fund the public services as our duty fixed by Parliaments. We give you a service that is even-handed, accurate and based on mutual trust and respect. We also want to make it as easy as we can for you to get things right.”