|Reform the Rotten Tax System or Face Revolution|
“Revolution, inevitably erupts when rising economic and social aspirations are not met by political institutions”, so said Samuel Huntington. A fair, equitable and corruption-free tax system must be a primary objective of a democratically elected government. It is now incontestable that the French, Russian and American revolutions had a common financial origin. All began as protest against unjust taxation. The years preceding the outbreak of revolution in France, Russia and America, to name only three, witnessed unusually serious economic and fiscal difficulties.
Flash back to 1789. Like today’s Pakistan, France was a striking example of a rich society with an impoverished government. Finance Minster Necker who had a reputation as a financial wizard, realized that the country’s extremely unjust tax system subjected the poor to a very heavy burden, and suggested radical reforms. He was fired. His advice went unheeded. The end of the old Regime in France in 1789 was brought about by an inequitable, unfair and unjust taxation system and a cash-flow crisis. Fiscal exhaustion precipitated the French Revolution.
In the backdrop of such momentous events, former Secretary Clinton, realizing that Pakistan’s extremely regressive tax system subjected the lower classes to a heavy burden, urged Pakistan to reform its tax system to yield more funds for flood relief and other needs from its wealthy. “Now, reforming Pakistan’s tax system is one area in which tough decisions will have to be made, because it will serve a broad double purpose. A broader tax base will mean more funding for roads, bridges, power plants, and airports, all essential elements of a growing economy”. Expanding the tax base, she added, “Would demonstrate to the international community that all segments of Pakistani society were willing to do their own part to rebuild their own country”. No action was taken. Pakistan’s half-hearted tax-reform efforts, never completely carried through, offended privileged groups without pleasing the underprivileged. Organized feudalism is preventing the triumph of middle class capitalism. The highly unjust, unfair taxation system persists till today.
Like Necker, Finance Minister of Louis XVI, Ishaq Dar faces an unenviable task: an ocean of public debt, a monstrous deficit, immense fiscal havoc, a bankrupt economy, glaring inequalities and political resistance to raising taxes from the merciless enemies of fiscal reform and defenders of upper class privileges, a corrupt government aptly described as a vacuum presiding over chaos.
Finance Minister Ishaq Dar is aware of the necessity of finding money to carry on the affairs of state. Like the Finance Ministers of Louis XVI, he knows that he has to take the money from where it is. Indeed, one might ask, from where else? It seems obvious even to a layman like myself that taxes would have to be raised and sacrifices made by those best able to afford them. But this does not seem obvious to the parliament or to the government. They stubbornly oppose all efforts to clear up the rotten tax structures which weigh so much more heavily on the poor than on the rich. And in their fanatical regard for their capital and profit which is matched only by their disregard for the salvation of the country, they transfer their capital abroad to such a massive extent as to make inevitable the fate of the currency and the bankruptcy of the treasury.
So, what is to be done? The very idea of asking those who have the money to shoulder the main burden of internal taxation is anathema to them. It frightens them to death resulting in the exodus of capital to safer, foreign havens. The selfishness of the moneyed class in avoiding any financial sacrifice to help put the country back on its feet is shocking. The possessors and manipulators of most of the country’s wealth will simply contrive to escape shouldering a fair share of the burden which will therefore fall hardest on the poor.
The power of a small elite which possesses most of the wealth appears to be greater than the power of the government elected by the people, presumably to run the country in the interest of all the citizens. This group is determined to preserve its privileged position and thus its money. In effect, there is a virtual alliance between the possessor class and the government, which it manipulates through its control of the parliament, the press, the financing of political parties, and the handling of its vast funds to influence the fiscal policies of government.
Faced with specific obligations to the country if the state were not to flounder in a financial morass, the moneyed class would shrink from meeting them. The Republic might go under but their wealth would be preserved. In the meantime they would not help keep it afloat by paying even their fair share of taxes. The tax burden is for others to shoulder. If that were understood by the government, the Republic could continue. If not, were there not other forms of government possible which promised more security for the entrenched wealth. In the back of the minds of some of them the idea is beginning to sprout that perhaps the nation could be saved – and with it their class and its privileges – by return to an autocratic regime, even a dictatorship.
The aversion of the rich to paying an equitable portion of taxes is notorious. Evasion of taxes, of course, is not peculiar to Pakistan. It prevails in all other Third World countries. In Pakistan the habit goes back a long way. The landed aristocracy, whose wealth is based mostly on great landed estates, dodge most of the taxes the state attempts to impose. And all the time the peasants in the countryside, the workers living in urban ghettos, the poor, and the lower middle class, groan under unbearable taxation. The aristocracy of money, having amassed its pile wants to stop the clock and standstill, forgetting that to standstill is to begin to die. It fiercely opposes change and reform and social agitation. The immunity of the landed aristocracy to direct taxes most obviously denies the treasury desperately needed funds.
Pakistan realized long ago that its coffers were empty; that it had exhausted its resources so completely that it could no longer fulfill its basic function, the protection of its sovereignty. But however grave their financial predicament, countries like Pakistan never go into receivership. However dreadful a financial situation they may get into, there will always be moneymen lurking in the wings prepared to set them on their feet – at a price. The price, in our case, is the abdication of our sovereignty to America. Financial rescue is contingent on loss of sovereignty. It is as simple as that. Not surprisingly, Pakistan today is neither sovereign nor independent, nor democratic. It is a “rentier state”, an American lackey, ill-led and ill-governed by its leaders.
Revolution comes of its own accord, un-engineered by anyone, and is born in the chaos of the collapse of the state. Today all the symptoms which one had ever met within history previous to great changes and revolutions exist in Pakistan. Never before, so few have plundered so many. An intolerable gap exists between what people want and what they get. Terror is the order of the day. The war on terror imposed on us by United States has become an albatross around the nation’s neck. Talibans are resurgent and anti-American anger boiling over. The country appears to be adrift. Pakistan is sliding into anarchy. Pakistan is in “great disorder”, “excellent situation”, to quote Chairman Mao. Unless people could be goaded into actively seeking a cure for their illness, they would continue to live in a stupor and die in a dream.
One of the earliest and most spectacular acts of the great uprising in Paris in July 1789 was to pursue the economic vampires who were widely rumored to have secreted away their booty. The blood suckers in Pakistan must either give an account of their larceny and restore to the nation what they have stolen or else, face the revolution.
One of the lessons of history is that when hunger and anger come together, people sooner or later, come on to the streets and demonstrates Lenin’s Maxim that in such situations voting with citizen’s feet is more effective than voting in elections. The bringing together of anger with hunger is like the meeting of two livewires. At their touch a brilliant incandescence of light and heat occurs. Just what and who would be consumed in the illumination is hard to tell.
The state of the Islamic Republic of Pakistan reminds me of the telegram from an Austrian General, responding to his General counterpart toward the end of World War I. The German General described the situation in his sector of the Eastern front as “serious, but not catastrophic”, in the Austrian sector, reply came, “the situation is catastrophic but not serious”. In Pakistan, the situation is serious verging on catastrophic.