Collect Taxes, Help the Poor
Can Pakistan’s government survive attempts at tax reform?
July 5, 2000
If you are as poor as most Pakistanis, the absence of any reliable government financing system will simply make your lot worse. Primarily, this means rich people will always be able to afford basic services like clean water, roads and policing which the governments in richer countries provide for everyone. In Pakistan, poor people simply have to do without.
Surely a functioning tax system is a prerequisite for any government policies to alleviate the plight of the poor.
Consider, then, what is happening in Pakistan. Only 1% of Pakistan’s citizens pay any tax. The rest are either too poor — or currently wily enough to keep their earnings out of sight of the state’s paltry troop of tax inspectors.
The consequence is that the government is unable to finance basic services, much less any real efforts to help people out of poverty. Who, then, will come to the rescue of the poor of Pakistan?
Well, the identity of that savior will surprise many self-appointed advocates of the poor. In fact, pressure from the IMF provides powerful assistance to Pakistan’s new government as it attempts to crack down on tax evasion. After a barely successful amnesty offer in June 2000, Pakistan’s anti-corruption agency is about to begin an energetic campaign against evaders.
After all, there is no point for the IMF to consider giving aid to a country whose elites are grossly enriching themselves — while not sharing a single dime with the poor and destitute in their own country.
Under those circumstances, one thing is for certain: The Pakistani government will never be able to fund schools, roads, water and other improvements until it starts collecting taxes from those who are waelthy enough to be able to afford paying them.
Incidentally, the IMF is not the only surprising hero in this story. Another is Pakistan’s new finance minister Shaukat Aziz, who is leading the reform. He was formerly the head of Citibank’s private banking operations.
Ironically, Mr. Aziz’s track record in dealing with well-to-do clients in the developed world may prove to be the perfect preparation for policies which will finally make a difference to the poor of Pakistan.