Changes in the rates of taxes and duties have burdened the low income group

By Syed M. Aslam
Dec 23 - 29, 2002

The Pakistan Human conditions Report 2002 paints a ghastly picture of grave economic inequalities. According to the report published by Centre for Research on Poverty Reduction and Income Distribution about 50 per cent or 72 million of Pakistanis are living below the poverty line. At least 6 million children between the age of 5 to 9 are out of school and about 55 per cent of the persons of 10 year or over are illiterate.

In addition, the report shows an extremely inequitable pattern of income distribution and tax burden. The top 20 per cent of the rich are sharing among themselves 50 per cent of the income while 20 per cent of those at the bottom of the rung were getting a miserly 6 per cent of the share.

While the gulf between in the income between the richest and the poorest has widened, the poor segment of the society has been burdened with increased taxation but it has been decreased for the rich. The tax burden has registered an increase of 4 per cent for the lowest income group while it has magnanimously been reduced by a 21 per cent for the high income group.

In addition, the report says that changes in the rates of taxes and duties have burdened the low income group profoundly adding that it has primary benefited the high income group. During 1978 and 1988, the burden of taxes on the lowest income group increased to a high 13 per cent and by 1998 it came to a high level of 3.8 per cent. On the other hand, there was no increase in the tax burden on the highest income group during 1987 and 1993 while by 2002 it actually registered a significant decrease. The primary beneficiaries of the reduction in the import duties have been manufacturers and producers while the expansion of sales tax net resulted in prices of even those commodities used mainly by the poor otherwise exempted from the sales tax.

The unjust income distribution and the inequitable taxation have immensely burdened the middle and low-income groups while it has provided an undue relief for those who don't really deserve it. The most terrifying aspect of the indicators is that it proves that the rich have benefited at the cost of the poor.

Over the years, the successive rulers proved that they were not shy of increasing the tax burden, the primarily victim of which was the poor. Ruler after ruler made it clear that collecting the taxes and increasing the revenue was the top priority of the government which cannot be challenged at any pretext. That explains the drastic increase in prices of such basic commodities as petrol, gas, electricity, flour, cooking oil, and all other kitchen items during the last decade. In a country where 'good governance' has become a favourite mantra, there are no signs yet of measures to make income distribution and tax burden equitable. There are no visible attempts by the policy makers to right the wrongs.

While the successive governments, be it quasi democratic or military, have never been shy to squeeze taxes and unabashedly as a 'right' they have never shown an interest to take measures to lessen the taxes primarily aimed at the poor and not the rich as they might have been. On the other hand, there have been no attempts to cut the governmental expenditure the most glaring example of which is the drastic increase in salaries of the top officials.

A week before the members of the provincial assembly took oath, the Governor of Punjab magnanimously announced a hefty increase in the salary of the elected members. The increase was made to look natural as it was based on the recommendation of a five-member committee comprising provincial secretaries and was only dome 'after detailed discussions."

The salary of the member of assembly was increased from Rs 4,500 to Rs 10,000 per month while the salary of advisor and parliamentary secretary was fixed at Rs 30,000 and Rs 20,000 per month respectively. There was a hefty increase in the salaries of the chief minister, speaker, minister, deputy speaker and the opposition leader. The monthly salary of chief minister was increased from Rs 21,000 to Rs 39,000 while that of the speaker went up from Rs 20,250 to Rs 37,000. The salaries of the minister, deputy speaker and opposition leader were increased from Rs 18,000 to Rs 35,000 each.

In addition, the speaker is allowed to use two official cars maintained at the expense of the government throughout his tenure of the office and for a period of 15 days thereafter. The speaker is also entitled to a house rent of Rs 25,000 per month if official residence is not available. The increase in the salary of the legislators in Punjab alone will cost the exchequer billions every year as the expenses for their airfares, accommodation, medical expenses, telephone, cars, etc., etc., are also paid by taxes collected from the people who can only dream of enjoying such facilities themselves.

With 1,157 elected representatives- 342 in the National Assembly, 358 in the Punjab Assembly, 168 in the Sindh Assembly, 124 in the NWFP Assembly, 65 in the Balochistan Assembly, and 100 in the Senate the elections for which will be held shortly, the pay increase to legislators, top judiciary and other top officials of the government will cost the poor country in an arm and leg.

Are the claims to increase the revenue by burdening the poor with heavy taxes without showing the least inclination to cut the administrative expenses can be called justified? You have to answer the question yourself.