ECONOMY
By: Nasser Yousaf
An undocumented community, a society or an economy is the wages of ignorance, ignorance of the kind that is not characterised by a disability to read and write, but in fact a state of being or an attitude that takes pride in staying aloof. A cynical explanation of such a depressing state of affairs could be told in a proverb that says, ‘where ignorance is bliss, it is folly to be wise.’ This in a nutshell is Pakistan’s saga of documentation.
Historical Perspective
The story of Pakistan’s experience with documentation is written in sadness. Documentation starts with a headcount of the people that inhabit a country. In the case of Pakistan it is mandated by the constitution the relevant article of which says the exercise is to be carried out after every ten years. In technical and popular parlance the headcount is known as census. Pakistan as an independent and sovereign state appeared on the world’s map in 1947, hence till date there should have been seven census reports. The fact that Pakistan has had only five censuses carried out so far -the outcome of the last one in 2017 still being awaited- is indeed disturbing. In the absence of any plausible explanation by the state for skipping the mandatory exercise on two occasions, it could safely be presumed that politicking interfered to the detriment of the people at large.
No country can afford to set aside an exercise as crucial as holding of a census except, of course, at great risk to its sense of dignity and proportion. Apart from addressing the issues of national sovereignty and security, a census finds out where and in which areas and sectors the country’s economy is ailing and what kind of medicine needs to be administered in what quantity. A census carried out efficiently and meticulously sets a country on the path to development.
Comparisons always help one learn lessons and make up for the shortfalls. India has held thirteen headcount, with no short or long interregnum, ever since it first conducted a survey in 1872. It is generally said that India is grappling with a plethora of insurgencies in all its nooks and corners but none of that has stopped it from keeping a count of the mouths it has to feed and the hands that have to feed those mouths. Undoubtedly then, India despite being home to more than 1.3 billion people has its social, political and economic indicators read better than Pakistan. Same is true of Bangladesh which is holding its decennial counts on regular basis and translating the rigours of the exercise in terms of better economic management and a qualitatively superior standard of life to its people.
A census per se is documentation. An authentic, exhaustive and descriptive survey provides a solid platform for each different sector of the economy to be measured accurately. For instance a timely census report can provide critical data input to the tax officers to build on their case for documenting each and every entity, trade and business whether under the charge of individuals or companies. Similarly, the country’s heath and education sectors can benefit from and perform efficiently only if persons in charge thereof are in possession of facts and figures which can be gleaned only from the census reports.
Documentation also indicates the level of cultural advancement of a particular class of people. Unfortunately, Pakistan cannot boast of much in this particular area, and hence our perennial predicament. Quite a large number of us here in Pakistan, some in high profile positions, start lying to our children from the day they are born. This we do by concealing their exact dates of birth at the time of admissions in schools. In the absence of a foolproof system of maintaining and verifying certificates of birth, people easily get away with by under stating the true age of their children ostensibly with a view that it may benefit their wards later in life by staying in the government service for an year or two more. Surprisingly, this tendency is rooted in our culture despite the fact that our overt and covert behaviour points to fatalistic tendencies i.e leaving matters of life and death and bread and butter to be determined by fate.
Scant regard is also paid to the maintenance of a register of deaths in the country and unless required by some department in the settlement of wills or property disputes people consider themselves least pushed to fulfil such important formalities of law and code. Such deficiencies while pointing to the poor functioning of the local governance system in the country also show in how many odd ways we try to delude ourselves by shying away from facing the reality.
Of the high profile people indulging in such practices, an example would suffice. Shahid Afridi, with a nickname of boom boom, is known to be one of Pakistan’s most flamboyant cricketers. After his retirement from international cricket. Mr. Afridi published his memoir titled ‘Game Changer,’ in which he admitted to being at least four years older than what was reported at the commencement of his career in the mid nineties. This news came like a blow to his discerning fans and admirers. But more shocking than the news itself is the fact that the matter was not probed further meaning thereby that all those records said to have been made (sic) by the celebrity cricketer would stay in the record books or even if removed by the International Cricket Council (ICC) the same would always be mentioned in questionable words. This indeed is one of the glaring examples of paying little respect to documentation.
Ironically, Pakistan made a most concerted and sincere attempt to document the country’s economy with a view to finding out the true revenue potential during the military regime of General Musharraf in the early 2000. Something that could not be achieved through political statecraft was now expected to be accomplished through the might of the military. It mattered little, however, which way the needful is done as long as it produced the desired results. Teams of the Federal Revenue Board (FBR) accompanied by soldiers of the Pakistan Army in uniform conducted a door-to-door survey over a long period of time. Printed forms asking for detailed information of households and business concerns were dropped at doorsteps with the direction to be filled in and returned by a specific date before being handed over to the same surveying teams.
Quite a large number of the households complied with the rigorous exercise by filling out the relevant forms but the enthusiasm fizzled out soon after the business community reacted strongly to the exercise terming it as an attempt at harassment. The failure of the exercise dampened the spirits of the tax authorities to such an extent that it forever abandoned any future attempt at going for the documentation of the business, trade and industry. The tax authorities also failed to capitalise on whatever amount of data it had collected by analysing the same with a view to drawing some kind of conclusions from the same. The extent of the despondency in the tax machinery appeared to be such that no record of the costly survey is available either in soft or hard form. In Sapiens by Yuval Noah we read that the Roman empire at its zenith collected taxes from up to 100 million of its subjects to provide for the expenses on the upkeep of its soldiery. More than fifteen hundred years later in the age of electronic revolution we in Pakistan do not know how to bring the potential tax payers into the net.
Ramifications of Non Documentation
Among other attendant undesirable effects, a most destabilising repercussion of the non documentation of the economy is that poor knowledge of the subject finds its way into the political discourse in the country. During the last couple of years we have been repeatedly told that 200 billion USD have been stashed on foreign shores by unscrupulous elements from the exchequer. Two hundred billion USD is a huge amount if we take into account the fact that the present Pakistan government could borrow only six billion USD from some of the countries willing to help out our country cope with its current account bills. Our politicians have recourse to data just a click away but they seldom utilise it to substantiate their arguments. This goes on to prove how little we regard the sanctity of the documents. According to a website (tradingeconomics.com), Pakistan’s GDP was 271.05 billion USD IN 2015. The GDP value of Pakistan represents 0.44 per cent of the world economy. GDP in Pakistan averaged 63.32 billion USD from 1960 until 2015, reaching an all-time high of 271.05 billion USD in 2015 and a record low of 3.71 billion USD in 1960. If the presumption that 200 billion USD were pilfered over a period of time by whosoever is accepted at the face value then that would amount to saying that more than three years of Pakistan’s GDP was stolen. The argument would seem even more exaggerated if we take into account Pakistan’s budget for the current financial year (2018-19) which incidentally is just about 37 billion USD.
The point to note here is that misrepresentation of facts and figures without taking recourse to documents is fraught with many perils. By doing so we lose the trust of others and in the event cause great damage to our image. Such misrepresentation also sends wrong signals to the lenders and donors working with the government on many projects. It tilts the balance in their favour in talks held for bringing about reforms in various sectors of the economy. In addition, it also leads to accepting stringent terms and conditions from the lenders which do not go well with the public. One of the most serious unintended consequence of launching unproven broadsides is thus reaped in the shape of rising inflation and the resultant outcry of the masses. It would help a great deal to probe further and discuss some of the major impediments to documentation in the context of Pakistan.
The following are some such impediments:
1: Physical Impediments:
Pakistan’s myriad economic, political, social and societal problems stem from a lack of proper documentation. Problems in all these areas are compounded further by the fact that Pakistan has a far from satisfactory literacy rate of about 57%. Efforts, especially in the economic realm, aimed at documentation are often thwarted by little understanding of the subject. Pakistan has a vast and burgeoning retail sector which we are finding it extremely difficult and problematic to capture with a view to making a data software of the same. While it may be relatively easy to bring the wholesale and industrial sector in the tax net, the retail sector escapes the net. We have to appreciate that the retail sector is growing by the day due to a rapid increase in the size of our population and the inability of the market to provide jobs. There are said to be around 2.5 million shops in Pakistan thus making the retail sector the third potent force after agriculture and manufacturing. Retail sector along with the wholesale makes up around 17% of our GDP but its contribution to Pakistan’s revenue generation is negligible as far as direct taxes are concerned. Direct taxes are considered as the accepted tool to measure a country’s level of development. According to the SBP report (2017-18), indirect taxes contribute around 60% to the exchequer, and this ratio is rising continuously due to non documentation of the economy. Physical impediments come in the way of documentation when trade bodies resort to strikes and shutter downs to escape the net thus causing further losses to the already under performing economy.
2: Administrative Impediments:
Tax administration worldwide is considered a specialised field. Tax levy, imposition, enforcement and collection is conducted in a manner that is called fiscal trial. Knowledge of tax statues and practices is a sine quo non of this procedure and taking it to a successful conclusion. Pakistan has a unique civil service structure where the tax officers are recruited in a combined competitive examinations held every year. The officers so selected go through various phases of training during the course of their service tenures. However, when these same officers reach the top grades after years of experience of fixing the nuts and bolts of the system, they are suddenly sidelined and told that they are not fit enough to lead from the front. The reins of the tax administration are then handed over to an officer of some other service group or someone from the private sector with the hope that the needful somehow could be achieved through police-like management rather than in a professional way. This has been repeatedly experimented in Pakistan, and it has repeatedly failed. The problem with this approach is that a non professional can never be held accountable for failures whereas a professional is ineluctably bound by the bonds of loyalty and honour of his profession. The rank and file in the tax machinery take pride in reporting more efficiently to a professional leader from within the system and feel belittled when as a force they are made to cow down to the dictates of an outsider.
3: Psychological Impediments:
Taxation is least liked by the citizenry worldwide. Even most developed countries have to face daunting tasks cajoling and reprimanding the non compliant and non taxpayers, enforcing the writ and stopping tax evasions. But the problem in the developing countries like Pakistan has an added dimension to it. There appears to be an apparently unbridgeable gap between the taxman and the taxpayer. Keeping in view the country’s literacy rate, especially among the business class at the retail level, tax laws, rules, procedures and forms need to be simple. The dread of filling out tax forms is deeply embedded in the minds of the potential would be taxpayers who consider it a better option to settle their issues with the unscrupulous among taxmen outside of the complicated procedures in an illegal way. Such psychological barriers continue to haunt Pakistan’s tax regime with no remedial measures in sight.
4: Artificial Impediments:
There are quite a few artificial impediments to documentation which are of our own making and which each successive government in Pakistan has been found reluctant to address. In fact, it would be right to say that every Pakistan government out of one expediency or the other has been seen to be perpetuating the status quo as far as non documentation is concerned. This has cost the country dearly not only in terms of economic losses but also in the shape of internal security challenges posed to the state. The most notable of suchlike impediments is allowing short and prolonged exemptions to certain areas of the country from the scope of documentation and taxation. Two such territories that have enjoyed such freedom from the rule of law are the former tribal areas called the Federally Administered Tribal Areas (FATA) and the Provincially Administered Tribal Areas (PATA). While exemption from taxes to some extent can be accepted on the ground of poverty and lack of business and employment opportunities to a certain section or class off people, it makes no sense to grant exemptions from documentation and registration of moveable and immoveable properties. Pakistan had to suffer the consequences of this when the people of FATA and PATA were allowed, and indeed still being allowed, to use their non duty paid vehicles without getting them registered. Hundreds and thousands of such vehicles could be seen roaming the length of these areas. Pakistan did not learn a lesson from this all round lawlessness even when an insurgency broke out in the Swat area of PATA towards the end of the first decade of this millennium during which these unidentified entities were freely used against the state. The tribal status of these two regions has since been withdrawn through the 21st constitutional amendment, but they will continue to enjoy exemptions from so many of the legal and regulatory requirements for at least another ten years. If people could not conceive of other ways of staying outside the purview of law and regulatory regimes, people in the know of things with vested interests concoct more artificial ways to force the state into doing their bidding.
CONCLUSION:
Pakistan must increase the ratio of direct taxes to give a progressive outlook to the economy. This is only possible if Pakistan has a complete database of all the latent potential. This in turn is only possible if we have each and every person in the country duly documented through no-holds-barred periodic surveys. Documentation must not be a one-off exercise but an ongoing process through an in-built mechanism. Government needs to take steps to instil confidence among the taxation-wary masses that documentation is not meant to penalise them but to create opportunities and improve the quality of life in the country.
The SBP annual report for 2017-18 says the total number of active taxpayers increased to 1.46 million in FY 18 from 0.98 million in FY 14; it looks too small when compared to 57.4 million employed labour force. This is far from encouraging. There is a general perception among the people in general and the business community in particular that they were being taxed far more than their capacity through indirect taxation. Indirect taxes apart from being regressive and cumbersome also discourage investment. Indirect taxes create an environment in the country that smacks of dwindling faith in the country’s institutions especially the tax machinery.
Also, officialdom in Pakistan appears to have benefitted little from the digital revolution other than to the extent of rhetoric. We tend to announce the computerisation drive with a lot of pomp and show but then leave it at that without even caring to attend to updating. Contrary to claims, people find it difficult to connect themselves to the country’s systems through the lukewarm medium of networking. For the digital revolution to be fully effective, Pakistan has to embed digitisation in the legal framework of the country.
After the 18th constitutional amendment Pakistan’s federating units have got extensive powers to levy and collect taxes especially the sales tax on services as a result of which the provinces are in the process of carrying out massive documentation. Services or tertiary industry is growing at a fast speed throughout the world and Pakistan’s economy must also enjoy its fruit. This will enhance the image of the country. There is a need for the federal and provincial governments to work towards greater coordination as far as data sharing is concerned.
posted by Nasser Yousaf @ 23:09
0 Comments
