Pakistan’s future at stake if tax not paid: UK
Foreign aid is not a long-term solution, Britain’s outgoing High Commissioner here Adam Thomson has asked Pakistan to widen its tax net
Islamabad: Stating that foreign aid is not a long-term solution, Britain’s outgoing High Commissioner here Adam Thomson has asked Pakistan to widen its tax net that includes the elite who “can afford luxury cars and foreign trips but can’t afford to pay their taxes”.
“The problem starts at the top. By paying their fair share of taxes and backing tax reform, businesses, wealthy individuals and elected politicians in Pakistan can lead by example,” he said.
Thomson said “these people should be paving the way, helping to close tax loopholes and encourage others to pay what they owe. Sadly, for now anyway, not all these people are the role models they should be.”
According to the Federal Board of Revenue (FBR), less than 0.5 per cent of Pakistanis pay income tax. That’s just 750,000 individuals out of a population of some 180 million.
Tax revenue in Pakistan, as a proportion of GDP is around nine per cent — compared with 14 per cent for countries with similar per capita incomes.
“Until Pakistan can raise enough money through tax, it will continue to be excessively dependent on loans and foreign aid. Debt to repay loans now stands at USD 60 billion.
“This means that over 60 per cent of Pakistan’s federal revenue is spent simply on paying back interest and debt every year, instead of being spent on vital services, such as education, health and infrastructure,” he wrote in an article published in the Express Tribune.
He said, “That’s bad housekeeping. It’s bad for the ordinary men and women of Pakistan. It’s bad for Pakistan’s international friends, who want to trade, not give aid and whose taxpayers should not have to subsidies those in Pakistan who should pay tax but don’t.”
He said about one in three Pakistanis live on Rs 50 a day or less. They need help and jobs. Around 12 million children are out of primary school. They need quality education.
“Without raising more money through taxation, Pakistan will not be able to meet the needs of its rapidly growing population. Pakistan’s future is at stake,” he said.
He said Pakistan government recognizes that it has one of the lowest tax collection rates in the world.
The PML-N manifesto set out the commitment to increase tax as a proportion of GDP to 15 per cent.
“Independent analysis shows this commitment is achievable. Better still, the government has given the FBR a clear mandate to increase tax collections by enforcing existing tax laws and bringing more people into the tax net who are, at best, creatively interpreting the rules or, at worst, cheating the system.”