Tax revolt or tax justice

Imran Khan’s call for civil disobedience, which in fact is incitation for tax revolt, has proved not only impracticable but also widely rejected. It confirms that our leaders act on impulses rather than on well-thought-for programmes and policies. Starting from challenging the credentials and legitimacy of a government, credibility of the voting process, he ended up for a call that amounts to undermining the entire State. As a leader he should have given a call for justice, taxing the rich for the benefit of the poor, growth and equity.

Tehreek-e-Insaf has not prepared the oppressed classes to come into power through constitutional means and then end exploitation according to the command contained in Article 3 of the Constitution. The one-year rule in Khyber Pakhtunkhwa (KPK) also shows no evidence of commitment of the party to the cherished goal of establishing a welfare state through local self-governance.

No doubt, the present tax system protects the rich and mighty-it imposes greater and undue incidence on the poor and middle-class people like 17% sales tax (in fact 30% to 45% on finished imported goods after levy of all kinds of duties and taxes). These regressive taxes take away larger portion of low-income groups compared to high-income groups. On top of it, the rich and mighty enjoy tax exemptions and concessions through Statutory Regulatory Orders (SROs) and exemptions contained in tax codes. They also make enormous wealth through rent-seeking. Enforcing tax compliance vis-à-vis the rich has become the number one challenge in Pakistan-Tax Directory published by Federal Board of Revenue (FBR) shows that only 840,000 returns/statements were filed and only about 13,200 paid tax exceeding Rs one million! It is not a mystery as to why the Finance Minister is not asking FBR to take action against the non-filers and publish their names as well. Obviously, it would unveil many names he wants to hide.

It is strange that Imran Khan, instead of asking to reveal the names of tax dodgers and beneficiaries of loan write-offs, has chosen to ask people not to pay their taxes and other dues. He should have questioned the decision of IMF and World Bank of giving loans of billions to a regime that extends tax concessions and amnesties to the rich.

Taxation in Pakistan is already viewed as oppressive, unfair and counterproductive by the majority. There is massive non-acceptance of tax obligations-like a situation of tax revolt against the State that is extracting money at source while most of the people do not even know about them eg prepaid mobile users paying 14% adjustable income tax. Many of the rich openly defy tax laws, but pay generously in charity. Their refusal to pay taxes is based on the argument that corrupt rulers do not deserve their money as they do not care a damn about welfare of the society. So their ‘tax revolt’ has its own justification!

Tehreek-e-Insaf has not campaigned for changing the highly oppressive tax system to become the voice of the voiceless millions. The provincial governments, including that of KPK, are guilty of protecting the rich and mighty by not collecting tax on “agricultural income.” The rich and mighty in Pakistan do not file tax returns. Since they are not paying direct tax according to their real incomes, the vast majority of citizens argue as to why they should be subjected to exorbitant and multiple indirect taxes even under the garb of income tax? They are especially annoyed with multiple indirect taxes at import stage, the burden of which comes down heavily upon the end consumers, vast majority of which represents weaker sections of the society.

All leaders of Pakistan claiming to be champions of rule of law and democracy have never presented any comprehensive agenda to restructure the existing oppressive tax system. The nation at present is heavily indebted due to unwise economic policies and lack of political will to collect taxes from the rich. This is high time that all political parties agree on Tax Justice Campaign to end perks and perquisites, tax concessions and exemptions available to the rich and mighty.

The repressive tax policies of successive governments-civil and military alike-have pushed millions of people below the poverty line. Whatever is collected is spent for the luxuries of the rich and mighty who only seem to matter in this Land of Pure-the funds meant for masses are wasted ruthlessly or plundered with impunity by corrupt politicians and state functionaries. Just take a look at how much money is spent for the luxuries of rulers, and bureaucrats as compared to allocations for education and health. Collection of taxes does matter but the real importance lies in their spending.

For strengthening democracy and economic progress, it is imperative to tax the rich, make rulers and civil-military bureaucrats accountable to people and ensure equality for all. In governance, everything is interlinked and interdependent-nothing worthwhile can be achieved without law and order, efficient justice system ensuring rule of law, improving infrastructure, taking care of the poor and less privileged, encouraging business environment and investment in human resource.

The above issues are completely missing in the present campaigns of change. The dream of building a new Pakistan-an egalitarian state-is not possible by merely grabbing power. History is full of examples where after capturing power, societies were pushed to complete anarchy, chaos and bloodshed by the “reformers” who incited people for what they called “change” or “revolution”. A distinction has to be made between ‘reforms’ and ‘disorder’. It has been explained in Quran through the term ‘fas’ad-fil-ardh’ [2:12] that covers all possible dimensions of injustice, high-handedness, crime, disarray, chaos, anarchy, mayhem, turmoil, pandemonium and confusion. Those who create fas’ad, mufsideen (miscreants), according to Quran, when asked not to spread fas’ad retort cheekily: “We do not spread fas’ad (disorder); rather we are the musliheen (reformist; those who promote order)”. Then Quran says: “Beware! They, indeed, are the mufsideen who spread disorder in the name of reform” (2:12). The rulers and their opponents-claiming to be reformers-unfortunately are indulging in hypocrisy. They must realise how the incongruity between their words and deeds exposes their real designs and leading Pakistan towards disorder and chaos.

Those who matter in the land and civil society must exert pressure on the rulers and their opponents to sit together and evolve consensus on one point that is implementation of Article 3 that says: “The State shall ensure the elimination of all forms of exploitation and the gradual fulfilment of the fundamental principle, from each according to his ability to each according to his work”. Our rulers and state institutions have collectively failed to ensure socio-economic justice that is the basis of any democratic dispensation. This failure cannot be overcome by resorting to long marches, sit-ins, civil disobedience or tax revolt. The only solution is empowerment of people and creating a welfare state in the light of Article 3, 140A and other provisions of the Constitution.

(The writers, tax lawyers and partners in law firm, HUZAIMA & IKRAM (members Taxand: www.taxand.com), are members of Adjunct Faculty of Lahore University of Management Sciences (LUMS). They can be contacted at info@huzaimaikram.com)