Reading Time: 4 minutes Rs 310 Billion worth of tax dodging occurs in Pakistan annually. And this too, from just five sectors. To put that into perspective, this is three times as much as the total budget allocation to the HEC, both developmental and non-developmental.
Rs 310 Billion worth of tax dodging occurs in Pakistan annually. And this too, from just five sectors. To put that into perspective, this is three times as much as the total budget allocation to the HEC, both developmental and non-developmental.
As Pakistan continues to hold its record for never having a government complete its term there are certain administrative issues that are sure to fall by the political wayside for at least the next few years (at best). The new government (which has been in and out of power for decades now) will blame the old one (ironically the one touted to bring about naya Pakistan) and vice versa and no real issue of substance will be productively discussed and acted upon.
One of the issues that comes up often when it comes to administrative problems is taxation, generally speaking the budget (allocation of said taxes) and poor management of said budget. There is always a myriad of short and long-term decisions that have to be made with very complex solutions that even advanced economic minds find it difficult to untangle.
However, there is a much simpler flip side to the issue of taxation and one that is unfortunately not discussed in the right ways on a mainstream level. The issue of tax collection, and tax evasion, See digital tax model. Though the question of taxes is universally seen as an uncomfortable one-people dislike those that implement taxes or raise them, and those holding the reigns dislike being disliked.
This is blatant in the fact that the new government is expanding much more energy on media spin campaigns in response to the deposed one than trying to steer the country through ever turbulent economic waters. The country is out of money (not a surprise) and the normal benefactors are being stingy enough to make people nervous (a little surprising for the new head honchos).
Regardless of whether we should be spending more on education, defense, or relief (the right answer, obviously, being option D-spending more money on more lavish meals for the government official themselves) which is best left to sharper minds, there is the question of where the money comes from.
Tax evasion and dodging is a much bigger problem, on a much larger scale than we seem to think when looking at popular discourse. The argument goes to “tax the rich” and is shot down by those that think the slogan a communistic assault on the common man’s dreams and freedom. And that is where it remains.
Fortunately, there are certain truths that cannot be hidden or brushed under the rug completely and certain kinds of data that might help the common man understand the world a bit better and nudge the momentum of things towards a more productive mainstream argument.
The global economy has more than tripled in the last three decades. And since 2015, the richest 1% hold more material wealth than the other 99% of the planet combined. Both of these stats are courtesy Oxfam International and go a long way in dispelling the idea that the dream of capitalism is in any way real for a large proportion of the population.
So, what gives? We know that there is room for tax. And we also know that the structure for collecting and redistributing those taxes are either full of loopholes, or are geared towards wealth accumulation instead of dispersion for the betterment of the masses. For the purpose of this discussion, we will look at the effects of tax evasion on the poor and the disadvantaged.
Now obviously the world is a massive topic to discuss when it comes to this, but there are interconnections across nations that drive home the idea that the world is not demarcated across national lines, but across wealth thresholds.
The not too ancient Panama Leaks and Paradise Papers went a long way to show how tax havens allowed greedy politicians/power-brokers/corporations to squirrel away obscene amounts of wealth away from the tax man (reducing the piece of the pie that could be given to the starving and the dying) and into safes and vaults to be converted into golden toilets, diamonds, real estate, and digital artwork.
Our own Pakistani brethren have been implicated in the now global business practice of the elite of hoarding wealth in tax havens. It is not enough that these individuals have made enough money off the backs of the labor of the common man to establish dynasties, but they have to dodge the little they pay in taxes to the state. Our own Mian Mansha and former PM Shaukat Aziz were among the 135 Pakistani politicians, businessmen, and officials named in the leaked Panama papers that exposed the global trend of tax dodging going on in the world.
Unfortunately this disproportionately effects the poor. When deprived of means to meet the demands of government expenditure, there is focus on where the influx is. And when deprived of the billions in taxes the rich have sent abroad, the only real way to tax and increase influx is to go after things that are easy to tax.
The dreaded indirect tax.
Reduce subsidies on one end, and tax food on the other end.
The government reduces subsidies on petrol, does not fund healthcare, nor invest in education or infrastructure-this reduces their expenditure. And then they increase sales tax, and other kinds of taxes that are general taxes and are the same for everyone. And where the middle and upper class can afford to pay a hundred rupees extra on some meet, or a fifty rupees on wheat-the poor cannot. Quite literally, instead of taking money from the ill-gains of millionaires, we are left with starving the poor.
According to a report issued by Ipsos, “Tax evasion not only affects overall development of the country but also triggers inflation as the burden to minimize the deficit is passed on to the public,”.
Pakistan’s shadow economy stands at 40% currently. This is highly alarming, as it means that the large proportion of anyone that makes any money is essentially forcing the poor to starve through tax evasion. Of course, one can blame the Government as if it is an Alien existence that dropped out of nowhere, but unfortunately ALL of our governments came and went due to the publics weaknesses, lack of moral core, and general lack of morality.
It is of high importance that the public realizes what, in truth, is in their best interest on a mass scale on the long term, rather than on an individual scale on a short term.
That, is the only way forward.
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