My challenge to all so called Well wishers of Pakistan

Dare to tax the rich and powerful!!

Dated: 23nd Feb 2012

Tarique Khan Javed
President, Overseas Pakistani Investors Forum

Pakistan is entering an interesting phase. As new political parties take Central stage and are ready to announce a defiant Manifesto to attract crowd the existing Parties who has thus far taken Votes for granted are thinking hard to come up with popular Manifestos.

Fruits of Democracy is bound to start arriving and bring radical change in the way the Country was run upto now. There is a desperate last minute attempt to stop the democratic process to maintain the status quo. Memo gate is an attempt to bring in Military dictatorship so that popular reforms are differed for some more years.

Weak politicians and Tax on Land:

The issue of Taxing the Rich of Pakistan has become an International issue. US have called for raising tax from the rich. IMF has recently said that Pakistani Parliament is inept and weak, avoiding taxing the rich and instead raising more tax from already crushed poor and using IMF as escape goat in Popular Press and that this was not fair.

PTI and APML are currently searching for people friendly policies to be included in their Manifestos. Judging the much increased level of awareness among masses, thanks to a vibrant media, these parties are likely to come up with radical reforms to capture Votes.

Even overseas Pakistanis are considering launching their own party with very revolutionary Manifesto.

This atmosphere which never existed before bode well for the people of Pakistan. They have a chance to arrest their declining standards of living.

Two old promises must be broken now:

1.    The Unionist Government in Punjab and Congress Government in KP refused to join Pakistan. A compromise was made to assure the Unionists that there privileges will not be touched. No Land Reform will take place in Pakistan and they will not be taxed as well.

2.    In the case of KP we brought the Tribal elders by our side by agreeing to their demand to close cantonments in WANA, TANK, JANDOLA AND RAZMAK.

This created a Country which was economically unviable and militarily crippled. However after 64 years of Lawlessness in FATA in 2010 Pakistan Army entered FATA and have reoccupied the bases and soon the safe heavens of terrorists and extremist will be closed. Thus the issue of Tax on Land remains the thorny National issue to be resolved.

British and Mughal Land Tax:

·       The promise of not taxing the Land Lords meant giving away the 80% tax revenue which the Mughals and Britishers derived from Land. The rent for having a Land for cultivation was so high during the British Rule that people use to refuse to take the Land for cultivation. This was particularly so in the Ryotwari system introduced in Madras and Bombay. The DC and Superintendent of Land use to determine the productivity of Land and demand an 80% share in net income against granting of lease for 30 years. Often cultivators were unable to meet the tax in cash and suffered jail and punishment. So taking over land was a risky business.

·       Under the Mughals the tax rate was same but in kind. The Jagirdars and Zamindars were also obliged to contribute a given number of fighters when called upon.

Foundation of Western puppet state:

In Pakistan this dominant source of income given up at the assurance of West that they will contribute generously to support Pakistan’s budget as long as Pakistan works for them.

If you add up all imports of Pakistan since inception and deduct total exports, remittances by Overseas Pakistanis and the existing Foreign debt you can arrive at the total Western aid given to Pakistan. It is substantial amount. Minus this Pakistan could not have survived so far and it can not survive for long in future as well.

Therefore before we make big claims of Honour, self reliance, dignity, and sovereignty we must first find a way to fix the huge anomaly in our National life!

Do any of our Leaders including Imran Khan, have the vision and understanding of this basics problem and guts to fix it. Answer is NO.

Land Reforms- a Tabbo subject:

Ayub Khan in 1959, dared to introduce Land Reform which benefitted just 186,000 families but left the Land holding almost intact. In 1972, Bhutto also dared and brought down Ceiling to 150 acres. This benefited just 71,000 families and Land Holding remained unchanged as Land was allowed to be transferred to servants and family members.

When Bhutto tried to second Reform in 1977 he was hanged. Since then no one has dared to implement the Land Reform Act of 1977.

Income Tax on income from Agriculture:

When Asif Zardari is asked how much tax he pays his simple response is that he is an Agriculturist and they do not pay taxes. Matter closed.

If every making more than Rs 350,000 pa is made to pay Income tax. This Direct tax revenue can increase many fold. This will not impact the small agriculturist as they do not make that much. This will only impact the well to do agriculturists like Mr. Zardari, who is obviously not poor with his Bilawal Houses if not the richest man of the World as popularly believed. Tax net of Pakistan can not be increased to a meaningful level without tax the income of Agriculture sector. Current Direct Tax payers of on 1.8 million in Country of 180 million are unbelievable. Indeed Pakistan is heaven for the Rich and Hell for the poor and Salaried class who form the bulk of Direct Tax payer. Lack of Direct Tax compels us to increase the rate of Indirect Taxes all the time. If Direct Tax collection rate can be increased to say 50% if not 95% in Countries like Canada. The burden on poor in the form of Indirect Taxes can be substantially reduced and a part of high Direct Taxes may be transferred to the poor in the form of Subsidies of Direct help in the form of Benazir Income Support Fund, or refund of Indirect Tax collected as applicable Fair Countries of the World. 

However it is said that 80% members of Assemblies have interest in Land therefore it is impossible to get any law passed from these assemblies which will impose Tax on this class or introduce meaningful Land reform.

RURAL- URBAN divide:

In recent times MQM tried to table a Bill calling for Land Reform restricting maximum holding to 37 acres; however it has not moved forward.

When Urban parties like MQM are can not make any difference in parliament. Who will push for the legislation? Who will bell the cat? That is the big National Question and Challenge.

Will any party with a Rural base dare to call for implementation of 1977 Land Reform Bill to bring down the maximum ceiling to 100 acres.

ANP’s Manifesto calls for bring down the maximum ceiling to 50 acres per family. However they have not pushed for implementation of Act of 1977 as a first step and keep Ruling providing strategic support to PPP government.

ANP and MQM if they were really serious about Land Reform they should have together made noises about Land Reform in and outside the parliament. But the fact that they did not indicate that they talk of this issue just to get support, knowing very well that they are unlikely to take a Central National stage when their promises may be tested.

Only a new player can dare:

The bold action required to tackle the issue can be taken only buy a new party with no interest in Ruling and thus no need to compromise. Such a party may come up with a Revolutionary Manifesto and try to reach the masses directly. The new technology of satellite TV, U Tube, FACE BOOK, Twitter, Google Plus and E Papers may be used to propagate the message besides the normal media and rallies. Mosques may be used as a network in Rural Areas.

Such a party can rely on Overseas Pakistanis a major source of donation. As they are keen to see Pakistan emerge as honourable State. Where they can return with their wealth and experience to make it one of the biggest Economies of the World following the Chinese model.

If this party wins it can implement the manifesto without worrying about the consequences. Even if it ousted after few years it should matter to them as they did not start the party to rule any way. This principled uncompromising state of mind is essential to bring about major change. If like Imran Khan just to rule the Party starts making compromises its Manifesto and aim can get diluted beyond recognition.

Land Reform and Agriculture Tax proposal:

Such a party besides other Reforms should give top priority to Land and Tax reform as that is the main issue. Reforms should call for:

1.    In first stage implement the Land Reform Act of 1977 to bring down maximum ceiling to 100 acres. Distribute the resumed land to Landless peasants at the rate of 2 acre per family. In second stage consider bring down ceiling to 37 acres as proposed by MQM. The lease should become conditional to using it for agriculture purpose only. Any one found to keep land idle for more than 3 years should be warned and if within one year the land is not put to use the lease may be cancelled.

2.    Introduce meaningful Rent on agriculture land as was applicable in British period. The rates applicable must be studied and inflation adjusted rates applied.

3.     The current exception on income from Land needs to be scarped. Income of Rs 350,000 pa from agriculture must be taxed like any other income.

4.    All land records should be computerized and may be marked on Satellite maps like Google. Land record must be available on Web along with NICs of the owners to control corruption and facilitate transactions.

Other Tax proposal:

To boost tax collection and reduce income and wealth disparity following taxes may be considered:

1.    Inheritance/State Tax: This tax taken on the death of person was applicable in British period and is still applicable in U.K. This was removed in Pakistan. This need to be reintroduced and a very high rate applied for 10 years, there after the rate may be reduced. Like Iran, UK and USA a high rate between 40 to 55% may be considered

2.    Wealth Tax: This tax was also applicable in Pakistan but was later withdrawn. This need to be reintroduced and a high rate applied for first 10 years. A rate of 5% on net wealth of Rs 5 crore may be considered.

3.    Tax on big Houses and flats: It is proposed that for any house above 200 yards and flat above 1200 sq ft covered area should be taxed at the rate of Rs 200 per yard and Rs 50 per sq ft respectively.

Like other civilized Countries introduction of above taxes will lead to reducing burden on the poor. Most indict taxes could be reduced or scarped altogether.

“MURAD PROPOSAL”:

For fixing our high borrowing and structural imbalance in our budget. Mr. Murad Ahmed Khan (Late) SVP, OPIF’s proposal for moving all Military bases away from Urban Centers may be considered. Murad, a builder estimated by selling Military land in cities a sum of Rs 50 trillion could be collected through a computerized Auction. He recommended that funds so collected could be used as follows:

1.    Rs 10 trillion to build State of the Art new bases 100 km away from current bases in remote uninhabited areas like Thana Bula Khan in case of current bases in Karachi and Hyderabad.

2.    Rs 12 trillion to pay off all internal and external debt.

3.    Rs 10 trillion could be invested in local and international market on behalf of Ministry of Defense. So that they may earn Rs 400 to 700 billion to meet their expenses.

4.    Rs 5 trillion may be reserved for Health. With a view to ensure basic health care for all.

5.    Rs 5 trillion may be reserved for Education. To ensure that every Pakistani gets normal education upto Matriculation.

6.    Rs 5 trillion may be reserved for Drinking water. To ensure that every Pakistani gets clean drinking water.

7.    Rs. 3 trillion in an International Reserve Fund to provide short term budgetary support.

I, think “Murad proposal” needs to be looked seriously to fix our budget problems for ever.

This combined the above tax proposals should lead to a stable Pakistan free from clutches of Foreign Aid and its attached enslavement.

A proud self reliant, completely independent Pakistan, with tolerable difference between rich and poor should be our National goal.

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