Why taxes are not a political issue in Pakistan?

Note: I sent this piece of writing to all the newspapers one by one; none bothered to see it or use it, that I am justified to conclude!

Why taxes are not a political issue in Pakistan?

All the politics is about collecting and spending taxes; but unfortunately that reality does not translate into political issues in Pakistan.

What it translates into is power-politics pure and simple! See the arrogant issueless politics of Pakistan Tehreek-e-Insaf; see the pseudo-development politics of Pakistan Muslim League (N); see the outdated Roti-Kapra-Makaan politics of Pakistan Peoples Party (P); see the identity-less politics of Awami National Party; and also see the self-centered religious politics of Jamat-e-Islami, Jamiat-e-Ulema-e-Islam (F). At the end of the day, all of their politics is about seeking power and state-benefits; or it is politicking on pseudo-issues ranging from anti-Americanism and pro-Palestine rallies to this or that religious or sectarian wrangling.

The political parties of Pakistan never ever take up any issue which directly concerns the ordinary citizens; such as the cruel state-machinery; deplorable conditions of social services; police brutalities; unavailability of prompt justice; protection of life and property, and most importantly taxes. For the last 68 years, these parties are constantly trying to protect “democracy,” which in fact is in danger by the very politics of the same political parties. And this “democracy” has delivered nothing to the people, but the crumbs.

Likewise, no political party minds the imposition of a new tax or an increase in an already existing tax; since they would be following the same practice while in the government. Probably for the same reason, no political party makes an issue of the taxes imposed, taxes increased or unjustified taxation. They may be objecting and debating it, now and then, in the national or provincial assemblies and resorting to a cosmetic walk-out or a boycott; however, they would never make it a political issue and educate their voters. Are they not the representatives of the people, who are required to take care of their interests? Or they are not the true representatives of the people!

For instance, take the case of Withholding Tax (0.3 % and 0.6 %) levied in this year’s budget. It got through the parliament smoothly; the opposition, a very active for that matter, having taken no notice of it. Only the middle-level traders, who are an organized community, and whom this tax affects directly, have come out against it. The other sections of society, which are not organized, such as pensioners, widows, ordinary savers, National Savings’ customers, it seems have no voice. It is in this context that question arises on the legitimacy of the role of the representatives sitting in the parliament. One must ask: Whose interests they are supposed to protect? And, whose interests they are protecting?

Crueler than this Withholding Tax, there is another arbitrary and unjust tax imposed years back on cash withdrawals from banks. Without any justification and starkly against the principles of taxation, it too penalizes those who use banking channels. Ironically, this tax also defies its purpose, i.e. promoting of banking channels and thus formal economy.

Isn’t is surprising and at the same time instructive that no parliamentarian and no politician or no political party took up the case of Withholding Tax on cash withdrawals and spoke against it let alone making it a political issue! Also, no court bothered to take “suo motto” notice of it. The same is happening as far as the Withholding Tax on all the banking instruments is concerned. No political party is ready to make it a political issue. They announced their support for the traders and sympathized with their cause; but that’s part of their power-politics!

As is the case, all the taxes ultimately trickle down to the end-consumers. Is it the reason no political party make them a political issue in which case they are not the true representatives of the people. But for the same reason, all the political parties must make the taxes a political issue in which case they may come to truly represent the people. Are the political parties of Pakistan are ready to play role of the true representatives of the people? Or they are there to vouch for their own special Ashraafi interests? Then the people must not vote them in power!

PML-N’s Bhatta or withholding tax

It seems the present dispensation of PML-N believes in no principles of taxation. It’s just there to extort whatever amount of taxes the Federal Board of Revenue may extort from the citizens in the form of bribes and in the name of taxes: of course, for itself as well as for the government.

However, the principles of taxation, the PML-N may be supposed to believe in, manifest themselves in the measures it announces in the budget and then obtains their approval from the parliament. That much is least controversial; what is controversial is the way the new taxes are conceived and implemented. As a rule, it’s the income or the consumption which is universally taxed. Also, the just taxation is not spending-driven, which certainly is the case as far as the PML-N government’s economic policies are concerned.

No doubt, there are countless examples available wherein arbitrary taxation was made recourse to; such as the medieval hearth tax, sort of a property tax. But, in the past they were no representative governments; that’s why they could afford arbitrary taxation policies. The question is whether PML-N, a democratically elected government, can afford such arbitrary taxation like the present withholding tax of 0.3 % on all the banking instruments, which will automatically increase to 0.6 % after September 30! Or it’s making a farce of the principle of “No taxation without the representation!”

It needs to be noted here that how come that only the traders have the courage  to espouse the cause of protesting against this arbitrary tax; doesn’t this withholding tax affect other low- and middle-income strata of society! For instance, the salaried persons, or pensioners, widowers, ordinary savers, whose earnings do not make a taxable income. All such citizens are being victimized only because on any day when they deposit or withdraw or transfer an amount of more than Rs.50, 000, they lose 0.3 % of their precious money! These citizens are not part of the protests against this Bhatta tax. They must be! Also, according to various reports the imposition of withholding tax has caused a massive reduction in the bank-deposits.

How blindly the banks operate in Pakistan the Finance Minister, Ishaque Dar has already admitted; he told that banks illegally and unjustly deducted the 0.3 % tax on all the banking instruments regardless of the fact that which ones belonged to the Filers and which to the Non-Filers. Apart from this mismanagement, the 0.3 % withholding tax is arbitrary, unjustified and has no grounds in the principles of taxation. It’s a Bhatta, at best; like the earlier one on the cash withdrawals.

Instead of putting the burden of failure on the shoulders of the FBR which according to a report of the Tax Reforms Commission is collecting only 5 % of the total income tax, the 95 % coming through withholding agents or voluntary payments. Thus the government has actually penalized those who use the banking channels.

Let any tax-expert tell what the nature of this withholding tax is! Is it on income, or is it on consumption? Or the PML-N has found another unique source of easy tax-collection, i.e. bank transactions? Better the PML-N government withdraws this Bhatta and focuses its energies on reforming the administration of tax-collection in the FBR. It is in the long-term interest of the state of Pakistan also.

It’s for the FBR to collect taxes including other taxes from the citizens who earn a taxable income. It’s not through the banks that a government collects such taxes which it fails in collecting via its tax-collector, i.e. FBR. PML-N, do not fail your government! Collect the taxes legally and principally!

Note: An edited version of this article was published in Dawn of August 10, 2015.
Here is the link: http://www.dawn.com/news/1199497/deviation-from-tax-principles