Is it Time for a national tax emergency?
Pakistan is journeying through a critical phase of its national existence vying for its economic sovereignty. Today, our country finds itself trapped in the whirlpool of loans, bank borrowings, mounting inflation and spiraling circular debt. Add to that Pakistan’s social agenda that is held captive in the shackles of debt servicing – all in an environment where tax evasion is rampant. On the other hand, with a growing population now estimated at 220 million plus- the government struggles to provide adequate basic services such as mega projects or new infrastructure for the social and economic uplift of its people. Adding to Pakistan’s economic dilemma is the fact that it has one of the lowest taxes to GDP ratio amongst the developing countries. This summarizes a situation that can be perhaps best described as a time for a “state of emergency on tax collection”. Because Tax is powerful. Tax is Empowerment. Tax is hand in glove with both good governance and democracy alike. The tax base and tax collection of a country is what leads the nation towards dependency or its independence. In popular parlance, “economically dependent cannot be politically independent”.
Role of taxation in nation building
The link between taxation and development is fundamental. It is often assumed that tax is a bad thing and the government wants to deprive citizens of their hard-earned money. But from an economic, justice and human rights perspective taxes are crucial for three reasons:
- Revenue: funding to deliver the services citizens need.
- Redistribution: to address poverty and inequality.
- Representation: building accountability of governments to citizens and reclaiming policy space.
A functioning state that can meet the basic needs of its citizens must rely ultimately on its own revenues to meet development objectives. Using the tax system, the state mobilizes domestic resources, redistributes wealth and provides social development, essential services and infrastructure. Effective tax structures can also create incentives to improve governance, strengthening channels of political representation and reducing corruption. Tax is fundamental to both social development and progress. However, unfortunately, owing to rampant corruption, oversight in the implementation of law – tax dodging and tax evasion has caused a blow to Pakistan’s fragile economy and added to its economic woes. Our country at current takes a direct hit of more than Rs.70+ billion every year due to the illicit cigarette trade that can be otherwise used elsewhere such as towards education, employment, social development and vital public services like health care, providing power to remote areas and building new roads.
In view of the above scenario, an initiative under the banner of “Behtr Pakistan” has started. This nationwide public service, national-interest initiative aspires to advocate tax collection on illicit cigarette sales by spreading awareness that hopefully leads to tax justice. The overarching objective is to sensitize both the stakeholders and the general public alike about the need for an urgent reckoning and intervention towards this alarming situation.