The ruling classes of Pakistan-militro-judicial-civil complex, businessmen-turned-politicians and absentee land owners- are responsible for pushing the country into a terrible mess. Their lust for money, control of resources and spending of public funds for luxuries has trapped the country in a deadly debt. The country is sinking further and further into debt quagmire and being pushed towards fiscal disaster. Our rulers beg for foreign assistance and bailouts, but ironically talk about self-reliance! Lawmakers make tall claims about prudence in spending but increase their salaries by 150%, when millions of their voters live below poverty line and majority of the country's children remain undernourished.
Increase of 150 percent in the salaries of lawmakers pinched the majority of Pakistanis as an act of rubbing salt in wound. One politician, President of newly-formed political party, Pasban-e-Pakistan, even went to the extent of calling it "white collar crime of the rulers". This unprecedented increase undoubtedly confirms apathy of the ruling party and opposition to the plight of the poor when minimum wage for an unskilled labour is less than even Rs 20,000.
The burden of increased salaries of lawmakers will be met by taxpayers. Even the poorest of the poor are paying sales tax that is 70% of total tax collection of Federal Board of Revenue (FBR). People are justified in asking why hundreds of billions of rupees, all from taxpayers' money, are spent on lawmakers when they are doing nothing for the welfare of the common people. Majority of Pakistanis now firmly believe that the ruling classes represent predatory elites who are busy in looting taxpayers' money and plundering national wealth through corruption in the name of democracy.
The Federal Cabinet on November 23, 2016 approved revision of basic pay of public office holders and lawmakers. The basic pay of Senate Chairman and National Assembly Speaker increased from Rs 119,008 plus two ad hoc reliefs of Rs 31,750 and Rs 11,901 to Rs 205,000. The basic pay of Senate Deputy Chairman and Deputy Speaker of National Assembly, from Rs 110,085 plus two ad hoc reliefs of Rs 29,360 and Rs 11,009 to Rs 185,000. The basic pay of members of Parliament increased from Rs 44,630 plus two ad hoc reliefs of Rs 11,903 and Rs 4,463 to Rs 150,000. The basic pay of federal ministers revised upwards from Rs 114,897 plus one ad hoc relief of Rs 11,490 to Rs 200,000. The basic pay of ministers of state raised from Rs 106,281 plus one ad hoc relief of Rs 10,626 to Rs 180,000.
According to Minister of State for Information, the revision was "inevitable as it was very difficult for lawmakers to meet home expenses with monthly salary of only Rs 44,000". According to her, FBR and Election Commission figures show that majority of the members of the Parliament "belong to the middle class". If this is the case, the increase was fully justified but the standard of living enjoyed by a majority of them speaks otherwise!!
On May 20, 2016, the National Assembly adopted a report of a standing committee of the House recommending about a three-fold raise in salaries and phenomenal increase in allowances of members of the National Assembly and the Senate. The House adopted a report of the National Assembly on Rules of Procedure and Privileges for an increase in salaries, allowances and perks of parliamentarians belonging to the two houses of parliament. Prior to increase, parliamentarians were getting around Rs 72,000 per month, which was proposed to be enhanced to Rs 200,000 per month.
It may be mentioned that the monthly salary does not include allowances which are allowed to members when the houses are in session, air tickets, vouchers and other perks. The daily allowance is now increased from Rs 3,000 to Rs 5,000, conveyance allowance per day from Rs 2,000 to Rs 3,000 and house allowance per day from Rs 2,000 to Rs 3,000. The House also recommended new monthly allowances that included office maintenance allowance of Rs 100,000, constituency allowance of Rs 70,000 and utility allowance of Rs 50,000. The House also recommended that transport allowance amounting to Rs 50,000 should be allowed per month. The National Assembly also wanted an increase in business class air tickets from 20 to 30, which might also be converted in favour of family members while a member provided with vouchers might be allowed to opt for encashment of vouchers with the same amount of Rs 300,000. The members also wanted an increase in the telephone allowance from Rs 10,000 to Rs 20,000. They also wanted an improvement in medical facility and hospitals to be prescribed in capital cities and other major cities.
Interestingly, the report of the standing committee mentioned that the salaries of parliamentarians should be above the maximum limit of the salaries drawn by the federal secretaries including special pay and allowances. The special report of the committee was placed before the National Assembly for adoption and further legislation accordingly. The matter of increase in salaries and privileges vis-à-vis comparison with bureaucracy by Parliament is interesting but shocking as well. They want to look more powerful than federal secretaries, which they otherwise legally are, but want to be in terms of salaries as well.
Our lawmakers keep on talking about reforming the tax system but shamelessly use FBR as a tool to get unprecedented tax breaks or ensure its ineffectiveness to amass enormous untaxed assets. Adding insult to injury, they enjoy life of luxury at taxpayers' expense. Due to meagre or non-taxation of luxury and commercial properties, eg, clubs and golf courses, unprecedented exemptions given to many, the national kitty suffers huge losses. If these losses are recouped, our tax-to-GDP ratio can rise to 15%. The narrative that Pakistanis do not pay taxes, popular with analysts, TV anchors, academicians, policymakers and foreign donors, is a hoax. The reality is that the poor are the victims of oppressive taxes, whereas the ruling elites are thriving on labour of the downtrodden.
There is a need to expose the role of these extortionist elites in our socio-politico-economic decay. Unfortunately, the media, being one of the beneficiaries of the exploitative system, cunningly divert the attention of the masses towards trivial issues through popular but hollow talk shows. Our ruling elites have only one agenda: self-aggrandisement. The concentration of power and wealth in their hands, coupled with lust for control, has given rise to perpetual institutional confrontations, terrorism, social unrest and economic disparities-putting at risk the very survival of the State.
There is no taxation of unprecedented perquisites and perks enjoyed by ruling elites. The most heinous crime is grabbing of State property by them under the pretext of rewards and awards (free or at throwaway prices). These "gifts" and other tax-free benefits carry a huge cost to national exchequer, which remains to be quantified. Taxes ruthlessly collected from the masses are brazenly spent on their luxuries-palatial bungalows, fleets of cars, army of servants, foreign tours and what not. The only solution, as suggested by the ex-Deputy Chairman of Planning Commission, Nadeem Ul Haque, is to monetize all their benefits and perquisites.
The corrupt and inefficient government servants faithfully serve the political elite and in the process also make a "fortune"-all at the expense of the general public. Take the example of FBR where billions are lost annually due to incompetence and corruption. Since the rich and mighty do not pay due taxes, regressive taxes are thoughtlessly imposed that largely hurting the poor and middle class. On the one hand, Pakistan is a country with one of the lowest tax-to-GDP ratios, and on the other, the bulk of collection is wasted mercilessly on non-productive sectors. At provincial level, there is no will to collect agricultural income tax from the rich absentee landlords-share of this tax is less than 1% of GDP!
Tragically, the citizens whose income is much below taxable limits under the income tax law are criminally taxed through withholding tax regime. Funds, extorted from their hard earned money, are plundered and wasted by the ruling elites. The militro-judicial-civil complex, Prime Minister, President, governors, chief ministers, ministers, state ministers, advisers, MNAs and MPAs together squandered Rs 400 billion in the fiscal year 2015-16 on perks, perquisites, etc. Not only this, these predatory elites did not pay tax on free or concessionary benefits and/or plots allotted in utter violation of section 13(11) of the Income Tax Ordinance, 2001 ["the Ordinance"], which says:
"Where, in a tax year, property is transferred or services are provided by an employer to an employee, the amount chargeable to tax to the employee under the head "Salary" for that year shall include the fair market value of the property or services determined at the time the property is transferred or the services are provided, as reduced by any payment made by the employee for the property or services".
Section 14(b) of the Ordinance defines "services" to include the provision of any facility" and the concept of "fair market" is defined in section 68 as under:
"68. Fair market value.- (1) For the purposes of this Ordinance, the fair market value of any property or rent, asset, service, benefit or perquisite at a particular time shall be the price which the property or rent, asset, service, benefit or perquisite would ordinarily fetch on sale or supply in the open market at that time.
(2) The fair market value of any property or rent, asset, service, benefit or perquisite shall be determined without regard to any restriction on transfer or to the fact that it is not otherwise convertible to cash.
(3) Where the price referred to in sub-section (1) is not ordinarily ascertainable, such price may be determined by the Commissioner".
Section 39(1)(j) of the Ordinance is also attracted which declares the following as income chargeable to tax: "The fair market value of any benefit, whether convertible to money or not, received in connection with the provision, use or exploitation of property".
It is sad to note that the militro-judicial-civil complex blatantly violates tax provisions and does not pay tax due on getting State lands, free accommodations and other benefits- all covered in section 13(11) and 39(1)(j) of the Income Tax Ordinance, 2001. FBR is not at all interested to tax them- their top notches are also beneficiaries of these benefits and also serve their masters loyally.
Ruling elites are unwilling to pay taxes on their unprecedented and exorbitant perquisites and benefits, shifting burden of taxes on the weaker sections of society. This is the real dilemma of Pakistan.
During the last regime of PPP, an ex-Member of FBR wrote a letter to the then Finance Minister, Dr Abdul Hafeez Shaikh, that massive tax evasion/loss of revenue had occurred due to non-taxation of government property given to high-ranking officials at concessional rates. He took no action and the same is the position of Senator Ishaq Dar- he has so far not given any thought to this letter, which is lying unattended for many years now.
The people ask when the time will come to take all tax evaders to task. They wonder why FBR is sparing tax-delinquent elected members, unscrupulous traders, mighty military and civil officers getting State lands without paying any tax. Recouping of lost revenue of billions of rupees from them will certainly convey a loud message to all that FBR means business and nobody is above law. As the mighty sections of society are not paying taxes due from them, the common people rightly argue against discharging their tax obligations, especially when the State has failed to protect their lives and properties, what to talk of providing basic facilities of education, health, housing and transportation.
(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS).)