No FBR reform?
PAKISTAN’S tax policy is regressive, unfair, opaque and complex, and tax administration is one of the most unproductive and corrupt anywhere in the world. Little wonder that there is hardly anyone who shows any trust in the nation’s tax system. Though it’s a misplaced argument, most people, especially businesspersons, would gladly pay more to the government indirectly than become part of a cumbersome system. The tiny number of tax filers — who overwhelmingly comprise salaried persons — and the collection of more than two-thirds of income tax through indirect withholding or advance tax regimes testify to this sad fact. Similarly, our ports remain porous as Customs allows everyone to understate or overstate the value of their international trade transactions according to their financial interests — albeit for a price. The admission by senior officials of the FBR before a parliamentary panel that refund claims of over Rs532bn had been blocked since 2014 to show higher growth in collection speaks volumes for the performance of its 20,000-odd staffers, and how the board operates to hoodwink government and people alike.
The present tax regime is a major reason behind the distortions in the economy and is at the heart of our fiscal woes as the tax-to-GDP continues to hover around 10pc, one of the world’s lowest. Ever since it took over, the current government has been struggling to turn around the FBR. During this period, four FBR chairpersons, including one borrowed from the private sector, have had to leave for failing to improve performance. An attempt to replace the FBR with the proposed Pakistan Revenue Authority in winter was thwarted by its senior officers who refused to accept any restructuring or reform plan unless it was ‘approved’ by them. Previous attempts at reform had also failed owing to stiff resistance from the board’s senior officers. The changes in the now defunct CBR Act in 2007 had resulted in its rechristening as the FBR but there was still no improvement in the revenue authorities’ culture or performance.
With the country’s fiscal situation becoming untenable mainly because of the FBR’s incompetence to document the economy and generate enough tax revenues, the government urgently needs to implement serious tax policy and administrative reforms. These reforms should focus on documentation of the large informal economy, elimination of presumptuous taxation and withholding regime, dismantling of incentives for tax evasion and dishonesty, simplification of tax laws, reduction in indirect taxation, and so on, besides ensuring transparency and full disclosures. The objective should be to evolve a tax policy that supports economic growth and bridges growing inequality in society by removing tax exemptions and taxing all incomes irrespective of their source. As indicated, any move at reform should anticipate opposition from within the FBR. The success of the effort will depend on the government’s will to stand up to vested interests for the greater public good.
Hunger & the virus
AS countries tackle the fallout from Covid-19 on the healthcare infrastructure and economy, looming over them is another grim challenge: preventing death by hunger. In a report titled The Hunger Virus, Oxfam International last week drew attention to how rapidly the crisis triggered by Covid-19 and the ensuing shutdown of the economy could fuel hunger in an already nutrition-deprived world. “By the end of the year, 12,000 people per day could die from hunger linked to Covid-19, potentially more than will die from the disease itself,” it said. Oxfam, an international charitable organisation which strives to alleviate global poverty, said the Covid-19 pandemic is “the final straw” for millions who were already facing the impact of conflict, climate change, inequality and a broken food system that has impoverished millions of food producers and workers. It pointed out the top 10 “worst hunger hotspots” in the world, including Venezuela and South Sudan that are already facing a severe food crisis which is worsening due to the economic impact of the pandemic. Emerging hunger hotspots include India, South Africa and Brazil, where millions are said to be suffering from the economic fallout. Some organisations have predicted famines of “biblical proportions” as unprecedented quarantine orders and the sealing of borders disrupt trade and create labour shortages. Moreover, locust attacks in South Asia and Africa will threaten the already dwindling food supply. Oxfam also drew a parallel with big companies, which it said continue to make a profit, and illustrated how eight of the biggest food and drink companies paid over $18bn to shareholders since January — a sum 10 times higher than has been requested by the UN Covid-19 appeal to stop hunger in its tracks.
In this extraordinary time, the world needs compassion and leadership. Some experts have identified that trade is essential to advancing global food security as the world’s transportation system moves staple food that feeds over 2bn people each year. Restricted exports and limited movement of supplies will lead to labour shortages and food shortages in importing countries. There are already examples of countries throwing out harvests due to a shortage of farmhands. Countries must prioritise agriculture as an essential business and ensure that markets have an adequate supply of affordable food. World organisations and governments must work together to deliver food to vulnerable populations, especially women and children and those in conflict zones, so that the most at-risk groups have access to food despite restrictions.
Elephant in the room
IN May, the Islamabad High Court ordered the release of caged animals that were kept in inhumane conditions at Marghazar Zoo. The news led to an outpouring of joy and a collective sigh of relief by local and international animal rights activists who had been campaigning for the release of the zoo’s long-suffering, solitary elephant. For decades, Kaavan suffered in silence in his small enclosure — chained, beaten, and starved — and showed signs of severe mental distress. Now, according to a more recent report, Islamabad High Court Chief Justice Athar Minallah has hinted at penalisingthe minister for climate change and members of the Islamabad Wildlife Management Board for failing to protect the animals under the Prevention of Cruelty to Animals Act, 1890. Just one month before the judgement to transport the animals to a sanctuary, the responsibility for oversight of the zoo was transferred from the Islamabad Metropolitan Corporation to the climate change ministry.
Marghazar Zoo, in particular, had become notorious for being a place where animals went to suffer and die. Besides Kaavan, last year, a video of a bear gasping for breath in the scorching heat was widely shared. The year before that, another companionless bear died due to an apparent brain tumour. In 2018-19, several nilgais died from a suspected viral outbreak, though some believed it was due to a lack of warm enclosures to keep them in at night. Some months before that, six deer were killed by a wolf that broke into their enclosure, while intrusions from wild boars and jackals have also been reported. Beyond the capital, similar deaths of wild animals have been reported from zoos in Karachi, Lahore and Peshawar. The use of animals for entertainment is a cruel and increasingly antiquated concept: exotic animals are brought into the country with great fanfare; only to leave the world prematurely and unceremoniously. If the ‘greatness of a nation’ can be judged by the way its animals are treated, where would we stand?