Our Announcements
Sorry, but you are looking for something that isn't here.
Posted by alipesh in Afghan -Taliban-India Axis, Afghanistan-Land of Backstabbers on June 25th, 2013
KABUL, Afghanistan—Before he set off for India with a wish list of military hardware, Afghan President Hamid Karzai gave negotiations with Pakistan one last chance — at least in principle. On April 24, he traveled to Brussels for a trilateral meeting with U.S. Secretary of State John Kerry and General Ashfaq Kayani, Pakistan’s chief of Army Staff, whose cooperation is seen as essential for any post-2014 peace deal with the Taliban. The protocol screw-ups were telling: A photo-op from Truman Hall, the residence of the U.S. permanent representative to NATO, shows a startled looking Kerry (standing in front of the wrong flag) betwixt the stonefaced Afghan president and his effective counterpart in Kayani. Pakistan’s civilian foreign secretary, also present on the trip, was not even in the frame.
Against this backdrop, it’s little surprise that the Afghan president had given up on Pakistan before he even touched down in Belgium. In trying to resolve the conflict with the Taliban before he leaves office next year, Karzai has repeatedly bent over backward in hopes of securing Pakistani cooperation — often risking political capital at home, where anti-Pakistan sentiment is on the rise. Now, it seems, Karzai no longer wants to wait at Pakistan’s mercy.
According to a source close to Karzai, Kayani actually agreed in the talks to help push the Taliban toward publicly agreeing to negotiate with the Afghan government, but the offer was evidently not trustworthy enough to dissuade the Afghan president from looking to Pakistan’s archrival for assistance. (The July deadline for a similar offer — made at a previous summit in Britain — for a “peace settlement” with the Taliban to be reached “over the next six months” is fast approaching with no progress.) Kerry summed it up aptly before jetting back to Washington: “We are not going to raise expectations or make any kind of promises that can’t be delivered.”
Pakistani observers say support for ending Pakistan’s historically interventionist policies has grown within the government — and to a lesser extent, within the military establishment — in recent years. But there has been little in the way of concrete change: The militant sanctuaries in Pakistan still go unmolested and the Taliban, long rumored to have close ties to Pakistan’s military establishment, have remained resolutely opposed to talks with the government in Kabul. Many believe that Pakistan, ever fearful of encirclement by India, wants to keep Afghanistan unstable after the withdrawal of NATO troops at the end of 2014.
In sharp contrast with his vocal optimism following previous dialogues, Karzai remained hushed after the Brussels meeting. Soon after he returned home, the border dispute with Pakistan turned deadly, as Afghan soldiers exchanged fire with Pakistani border guards. One Afghan soldier was killed and several Pakistani guards were reportedly wounded. In response, Karzai met with the family of the soldier who died in the clashes and declared him a national hero. The presidential palace then issued a statement on behalf of tribal elders Karzai had met, claiming that Afghan territory extends “as far as Attock,” a city located deep inside Pakistan that borders its Punjab province. For its part, the Afghan media — which mirrored public sentiment — portrayed the events as if Afghanistan were at war with its neighbor. (The Pakistani press, by contrast, hardly mentioned the event, preoccupied as it was with its own historic election.)
Then on May 21, Karzai dealt Pakistan the ultimate snub by travelling to New Delhi in search of military equipment that, according to Indian media included 105 mm howitzer artillery, medium-lift aircraft, bridge-laying equipment, and trucks. No public statements have been made specifically addressing Karzai’s request for hardware, but sources close to the Afghan president suggest that India is sending a military mission to assess Afghanistan’s needs and will most likely provide some of the equipment. After a decade of limiting its $2 billion in assistance to development and reconstruction so as not to irk Pakistan, India seems willing to up the stakes. In New Delhi’s calculation, respect for Pakistani sensitivities hasn’t protected Indians from attacks in the past. Even building a highway cost India 135 casualties — “one human sacrifice…for every kilometer and a half constructed,” as the country’s foreign minister put it.
Other government sources, both Afghan and Indian, however, say that Karzai’s request poses a number of problems, one of which is logistics. India would have to cooperate with Moscow in order to supply the Afghan government, since some of the hardware –like Antonov An-32 aircraft — is manufactured in Russia. It would also have to consult both Moscow and Tehran for transit routes in order to deliver the weapons to landlocked Afghanistan. This gives Pakistan two potential pressure points from which to exert influence over the deal. (Both Russia and Iran have their own fears about allowing arms to be sent to a volatile country so close to home.) Training and maintenance poses another challenge as hardware cannot be simply handed over to inexperienced armed forces.
In public at least, Pakistan is downplaying fears that it will try to derail the arms shipments. “As a sovereign country Afghanistan can pursue its own policies,” Pakistan’s Foreign Secretary Jalil Abbas Jillani told reporters last week. “But we hope that it would mind the overall peace and security situation.”
Reference
Posted by ali rehan munir in Economics, SHARIF BROTHERS TAX CHEATS on June 25th, 2013
Majority of the Pakistanis were dejected after hearing the budget speech on the evening of June 12, 2013. Not because there was no relief for the poor as this was not expected by anybody from a government just installed and dealing with a ravaged economy but the real cause of disappointment was demonstration of lack of will to tax the rich – on the contrary increasing the brunt of indirect taxes manifold on the poor, and inflicting pain on the salaried class.
The government failed to take any credible measures for revival of the ailing economy. The major taxation proposals show that the poor will have to face more miseries – regressive taxes are on increase. On the contrary, the rich and the mighty have again managed to escape personal taxation on their colossal income and wealth. The gigantic bureaucratic apparatus – epitome of bad governance – under pressure is given 10 percent pay raise but not a single step has been taken to curtail their monstrous wasteful expenditure and monetize all their perquisites and benefits received in kind. The analyses done by independent economists and observers reveal that the government of Pakistan Muslim League-Nawaz (PML-N),
in its maiden budget has failed to meet the economic challenges of the day confirming the oft-repeated apprehensions that no homework was done nor was there any policy paper available – PML-N like its predecessor PPPP acted on the advice of bureaucracy. There is nothing innovative in the budget. It is in fact, the 66th bureaucrat-controlled budget and what do we get? Same old rhetoric about economic revival!
What should have budget 2013-14 been like? This question was never discussed by the elected government during its election campaign or within the party. Pakistani political parties have yet not learnt that they need to have select committees working on various matters so that once in power they can implement their well-thought-for, well-debated and well-researched policies. Since there was no such preparation on the part of PML-N, the annual budget, as usual was hastily made in the same old mould – bureaucratic-controlled and pro-rich. Nobody realised while preparing this important document that at this juncture of history, Pakistan needs class stability to avoid chaos, civic strife, lawlessness and religious obscurantism. The burgeoning debt servicing, increased military budget, high inflation, unjust tax system, wasteful expenses, industrial slowdown, recession, and inefficiency and bad governance pose serious challenges to our economic survival. But, in the budget no serious effort is made to meet these challenges – the budget-makers were more interested to balance their books through foreign and domestic resources (some purely imaginary or unrealistic). Somebody asked, what else could one expect from an accountant? But the question is where the stalwarts were? People like Sartaj Aziz and Hafeez A Pasha, who are known economists.
Dr Hafeez Pasha in his comments on the taxation proposals of the budget, published in an English newspaper, claimed that “virtually all sectors have been tapped.” We have serious reservations about this claim. The budget has failed to provide steps to bridge the tax gap of over Rs 6,000 billion. Tax potential of Pakistan is not less than Rs 8 trillion. The simple calculation is: suppose we have 10 million individuals having annual taxable income of Rs 1.5 million (a very conservative estimate), total income tax collection from them comes to Rs 3,750 billion. If we add income tax from corporate bodies, other non-individual taxpayers and individuals having income between Rs 400,000 to Rs 1,000,000, the gross figure comes to Rs 5,000 billion. FBR collected only Rs 716 billion as income tax in 2011-12. Similarly, due to rampant corruption in sales tax, federal excise and customs duties, the total collection is not more than 30 percent of actual potential. In fiscal year 2011-12, FBR collected Rs 804.8 billion under the head sales tax, Rs 122.5 billion under federal excise duty and only Rs 216.9 billion under customs duties. The total indirect collection of just Rs 1,148.2 billion was pathetically low. It should have been at least Rs 3,500 billion. Budget needed to outline measures to bridge the prevalent tax gap without imposing any new taxes or raising the tax rates. If it is still done, we can change the entire fiscal scene of Pakistan – instead of budget deficit we would have surplus funds.
In view of above, there was no need of increasing sales tax rate or federal excise or enhancing rates for salaried persons. The need was to shift FBR’s management to an autonomous board comprising professionals and establishing an independent tax appellate system so that tax obligations are judiciously imposed and collected rather than through arbitrariness and highhandedness and that too only from those who file returns. FBR has failed to force millions to file income tax and sales tax returns but keep on creating huge demands against the existing filers. This is the reason why people do not file returns as they say once you do so then you are under constant threat of being blackmailed by officials and in case you do not oblige, you are subjected to arbitrary orders. One may ask what FBR has done about the following pointed out by Nadra:
— There are 1.611 million people who frequently embark on international tours but do not pay a single penny as income tax.
— About 584,730 Pakistanis have multiple accounts in domestic and multinational banks, but do not possess NTNs.
— Over 56,000 people live in posh areas and more than 20,000 people own luxury cars, still pay no income tax.
— There are 66,736 individual consumers who pay large utility bills, but no income tax.
— More than 13,000 people have licenses of both prohibited and non-prohibited weapons, but they do not possess an NTN.
— There are 25,130 people who are engaged in lucrative professions like medicine, engineering, law and chartered accountancy, but they do not pay a single penny as income tax.
— Nearly three million people possess a National Tax Number (NTN), but only 1.4 million of them filed income tax returns last year.
Had FBR performed its functions, we could have easily collected Rs 8,000 billion without changing anything. Even economist like Dr Hafeez A Pasha, who has been Chairman, Advisory Council of FBR, keeps on saying that our tax base is narrow. He, like many others thinks that only those who file returns are taxpayers. In fact, the total number of taxpayers is over 50 million – mobile users who pay 10 percent adjustable income and 19.5 percent sales tax. It is true that only 1.2 million out of these taxpayers filed income tax returns in 2012. Figure of 1.2 million is only that of return filers and not taxpayers. In the income tax realm, every account holder of a bank, who receives any amount of interest, is subjected to 10 percent withholding tax and is thus a taxpayer. It is worthwhile to note that in the case of individuals and association of persons, tax deducted at source is full and final discharge under section 169 of the Income Tax Ordinance, 2001. They are merely required to file a simple statement under section 115(4) of the Income Tax Ordinance, 2001 ie if they do not have any other source of income. Had FBR allotted all of them NTNs, it could proudly be said that there are over 50 million registered taxpayers in Pakistan.
The real issue is non-taxation of super-rich who owe billions to the national exchequer. What has prevented the FBR to take action against them? After receiving data from Nadra, why FBR instead of taking action against them was proposing an amnesty scheme? Why no action is taken against them till today?
The revenue target fixed for FBR at Rs 2,475 billion is pathetically low when the actual potential is not less than Rs 8,000 billion. The issue is that of enforcement of tax laws compelling all the people having income of Rs 400,000 or more to file tax returns. Instead of doing this, Ishaq Dar has opted to propose more taxes on the lower income sections of the population. Increase of one percent in sales tax rate and further two percent for supplies made to non-registered persons, five percent on top of the standard 16 percent on non-registered commercial and industrial consumers of electricity and gas, increase in federal excise duty on beverages and cigarettes, expansion in items, which are chargeable to sales tax on retail prices, are all regressive tax measures. When FBR cannot enforce the existing laws, what is the guarantee that these new ones would be implemented? Obviously more corruption would follow as more people would want to evade taxes and tax officials would benefit more as they get their due share. The same would be the fate of withholding taxes on hotels, clubs, marriage halls, restaurants, cable operators, margin and trade financing, motor vehicles (in lump sum), foreign-produced films and TV serials. Who will enforce these laws? In the name of audit of withholding agents more money will go into the pockets of these unscrupulous officials.
The earmarked income support levy on moveable assets is again a wrong measure. It would be like surcharge in the 1980s and the export development surcharge/cess more recently, all proving disastrous. The assignment of taxes at the local bodied level is the answer but the governments are not ready to meet their Constitutional obligation clearly envisaged in Article 140A which says: “Each Province shall, by law, establish a local government system and devolve political, administrative and financial responsibility and authority to the elected representatives of the local governments.”
Shahid Hafeez Kardar, a leading economist and former finance minister of Punjab, very rightly observed: “In our case tax administration weaknesses with regard to enforcement arise because of an ineffective legal system and the lack of effective accountability of government employees. Greater publicity should be given to cases of tax evasion (only those upheld by courts or conceded to by taxpayers) in the hope that public shame would serve as one of the deterrents to tax evasion. Good governance in a structure of transparent taxation cannot be achieved with the same ease as computerisation of the taxation system through purchase of equipment and supporting software. These essentials will continue to elude us as long as the governing political system nurtured and supported by the elite is financed by black money through institutionalised instruments and mechanisms for evading taxes. How does one overhaul such a system through the transformation of the political structure is a million-dollar question that defies easy answers as to the need for tax reform built around transparent and simpler systems of taxation. However, the reality is that there are no quick fixes. Exercises to simplify tax laws and to ensure effective enforcement can take several years, as the experience of even developed countries shows – for instance, it took Canada 10 years to implement the proposals of the Carter Commission.”
Our tragedy is that on the one hand we have too many taxes in the country (federal and provincial) and on the other the benefit of revenue collection is not reaching the down-trodden. The few rich are the real beneficiaries of every luxury that is available. Fiscal gap is increasing every year bringing more miseries for the common man of Pakistan. We have utterly failed to reform our tax system, a process initiated as early as 1990s.
In fact, the real malady has not been properly studied by anybody. There is something fundamentally wrong with Pakistan’s constitutional structure of distribution of taxing powers between the federation and the federating units. In all major federations – the US, Canada and India – the federating units have the exclusive right to levy tax on transactions of goods and services within their geographical boundaries. In Pakistan, the Constituent Assembly took away this right of levying sales tax on goods from provinces in 1948 – none of the provinces ever raised a voice for its reversal. In the 7th Award as well, all the four provinces conceded that forthcoming Value Added Tax (VAT) on goods should be levied by the Centre.
The Centre has always usurped the right of the provinces to levy tax on goods and services within their territorial jurisdiction. Assignment of taxes is a vital constitutional and political issue and it is high time that the newly-elected parliament pay due attention to solution for judicious distribution of taxation rights between the Centre and the federating units. The imbalances and unjust monopoly of taxes with Islamabad is a perpetual source of disharmony between the Centre and the provinces. It is not distribution under National Finance Commission Award that matters but the question is why provinces are deprived of their right to levy taxes on goods within their territories. Why is the Centre imposing sales tax and federal excise on goods?
Federal highhandedness in tax matters has destroyed the financial and economic rights of provinces. The provinces should have the exclusive right to levy taxes on goods and services within their respective physical boundaries, but the Federal Government blatantly encroached upon their undisputed right by levying taxes on goods and services under the garb of presumptive taxes in Income Tax. Such taxes cannot be termed as taxes on income (which the federal government is empowered to levy under item 47 of the Federal List) but tax on goods and services. It is a great tragedy that this argument was not presented in the Supreme Court when the constitutionality of such provisions was challenged in 1991 and the debate merely revolved around academic discussions over the concept of income. If the federal government can treat tax on goods and services as tax on income, as held by the apex court per incuriam (a mistaken judgement) in Elahi Cotton case PLD 1997 SC 582, then what will be sanctity of division of fiscal powers provided in the Constitution of Pakistan between the Federation and the provinces.
Despite federal highhandedness in levying unjust taxes and denying the provinces their legitimate shares, the Centre has miserably failed to reduce the burgeoning fiscal deficit. Had provinces been allowed to generate their own resources, the present chaotic situation could have been averted. The federal government has the audacity to claim that provinces lack infrastructure to efficiently collect taxes – an attitude that is reflective of colonial legacy and proved wrong by the Sindh Revenue Board and Punjab Revenue Authority by collecting sales tax on services.
On the one hand the provinces have been denied autonomy and on the other, money that belonged to them – collected as federal taxes – is given to them as act of benevolence – it is adding insult to injury. This is a considered policy of control for maintaining hegemony over federating units. The provinces should have exclusive right to levy taxes on goods and services generated within their boundaries. But they should surrender right to taxation on agricultural income tax to the federation. The National Parliament and provincial parliaments should forge a consensus on this issue.
The federal government has miserably failed to tap the real revenue potential, which is not less than Rs 8 trillion. The failure of FBR on this account adversely and directly affects the provinces as they are wholly dependent on what the Centre collects and transfers to them from the divisible pool. Pakistan is thus, caught in a dilemma: Centre is unwilling to grant the provinces their legitimate taxation rights as well as collects too little to meet their overall financial demands. The size of cake – divisible pool – is so small that nothing substantial can be done for the welfare of the poor masses, no matter in which part of the country they live. The real issue of generating sufficient resources for the less privileged is still unattended.
HUZAIMA BUKHARI AND DR IKRAMUL HAQ
(The writers, tax lawyers and partners in HUZAIMA & IKRAM (Taxand Pakistan), are Adjunct Professors at Lahore University of Management Sciences)
Courtesy: Ali Syed