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Taxation power and democracy

In the wake of an apparent economic crisis, caused by multiple reasons, particularly a killing self-inflicted political instability, myopic economic policies of last seven decades, unthoughtful actions and measures taken in conflict of interests to perpetuate a retrogressive and oligarchic rule, now there is said to be an imminent default on foreign debts if some harsh steps are not taken. The federal government has resorted to heavy taxation on the industrial and commercial sectors by imposing super and other taxes. The prices of food, electricity, petroleum products, gas and all other necessary items have been increased more than once and put beyond the reach of a common man. On the other hand, the budget documents show that there was no decrease in non-development expenditure of the federal government. Salaries and allowances of highly paid classes and groups have been increased. Budgetary allocations for health, education and infrastructure compared to other areas reflect priorities of the federal government. The resultant unrest and clamor amongst the people cannot be mitigated even with a heavy dose of patriotism. There is no change in the lifestyles, protocols and waste of national resources on non-productive large foreign entourages and free pilgrimages and other disgusting avoidable expenditures of state officials, ruling elite and the establishment. One cannot avoid comparisons and showing a mirror to the blind. Prior to the present economic boom one would see baggy suits worn by the Chinese from top to the bottom. Even today, all Indian officials travel in locally- made vehicles. Afghan leadership lives the life of a common man on the streets and they have not begged from foreign governments and the IMF. Even in Bangladesh, the redoubtable Shaikh Hasina Wajed has made her late father’s words true and changed the lot of its people. The blessings of democracy and honest governments are being reaped all around the region while Pakistan, after seventy-five years of its independence, struggles for its survival. Why?

The Constitution grants taxation power to Parliament for federation. It even goes on to promise under Article 77 that there shall be no tax except by or under the law. Taxation is an attribute of sovereignty of a state emanating from necessity. It is a compulsory exaction for public purpose. Courts have hitherto resisted their temptation to judicially review the exercise of taxation power by the legislatures. People, however, express their grievances through other means. The Boston Tea Party (1773), the Salt March to Dandi (1930) and more recently, tragic incidents in Sri Lanka can be referred to show that when taxation amounts to destruction and confiscation and tax money is expended by the oligarchy for its ostentation, people find a justification to violently resist governments, especially when they are advised to eat cakes if no bread was available (tea-cups episode). In a democracy, however, people express their anger through the ballot-paper. In Pakistan, people express doubts about the ballot-box.

All powers, including the taxation power, is a trust under the Constitution. The whole constitution is based on trust. Any tax measure that is meant to add to the suffering of people cannot be termed a measure for a public purpose.

People have got limited choices for survival. Street crimes land highway robberies are now a routine. The high walls of posh localities may not remain high enough soon. It is time to act wisely.

There was a momentary but very strong reaction to the newly introduced tax measures from the business circles. Stock market virtually crashed on Friday last. Other indicators also show a negative impact on the economy. The wheels of economy might stop to grind. All is good, a mantra of federal government Mantries, very soon has already turned into a bizarre chorus. The legislative business undertaken during the last two and a half months shows that the coalition federal government instead of mitigating miseries of the people by taking some sensible economic measures and showing visible austerity moves by cutting down unnecessary expenses is busy in amending laws to manipulate the system to its advantage for the purpose of winning the next elections. In any other country, with these highly unpopular measures, the defeat of the sitting government would be certain. But perhaps it is too well known here how elections are held in Pakistan and ‘favourble results’ are achieved.  Now, with the imposition of super and other taxes and withdrawal of subsidies, in all likelihood, all little economic and commercial activity will stand reversed as with an increased input cost prices of goods shall increase and become out of reach that will affect demand. That will ultimately destroy commercial, industrial and economic activity proving the rule that power to tax may amount to a power to destroy  (Chief Justice John Marshall in McCulloch v. Maryland-1820).

The coalition federal government came to power with one-point agenda. Get rid of Imran Khan. It had no plans. It was not in a position to make and implement any long-term economic policy. The maverick prime minister hardly realized that running a federal government with limited powers is a different ball game than running a province with huge taxes coming from the divisible pool. Moreover, the federal government, under a huge political pressure and with the possibility of going to general elections sooner or after a year or so, is in a great fix and cannot afford to make bad and unpopular decisions any more. Further, with too many chefs in the economic kitchen and several bosses around, the future of the federal government remains uncertain. Like well-dressed salesmen, federal government’s economic team, is selling promises and trying to employ the old trick of putting all blame on previous governments not realizing that social media revolution in Pakistan has removed all barriers between truth and lies. No more secrets.

It is generally believed that despite serious misgivings and inexperience and U-turns, previous federal government had been able to turnaround, revive and sustain textile and other industries and a sustained growth was seen in many areas. This is reflected in the Economic Survey of 2021-2022. Had it been allowed to complete its tenure, there is a view, it could have taken Pakistan out of the woods. But these last three months have been heavy on Pakistan. Owing to a killing political instability, rising prices of POL, unjustified and unreasonable budgetary allocations, despite denials, the present government has already become very unpopular. It is believed that once again Pakistan has been pushed back to a backward, retrogressive and reactionary society. If people become opulent they raise voices and ask difficult questions. There may be no truth in the regime change cry of the last government but present economic conditions force a common man to buy that story.

The solution to the perennial economic sufferings and all other problems of Pakistan faces today is well known to everyone. It is a matter of changing a mindset that has been dictating events and the course of history for the last seventy-five years. Now in view of a serious existential threat where all are exposed in this power-game it is time to restart again from where we lost seventy years ago. Let the system grow in accordance with the Constitution without crutches and interferences. By making bona fide blunders this nation has the potential to rise and claim an honourable place amongst nations of the world and to finally get rid of its begging bowl.

Muhammad Waqar Rana, "Taxation power and democracy," Business recorder. 2022-06-27.
Keywords: Economics , Monetary fund , Economic crisis , Economic policies , Petroleum products , Social media , Shaikh Hasina Wajed , Imran Khan , Pakistan , Indian , Afghan , Bangladesh , POL

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