Pakistan already has one of the lowest tax revenue rates in the world, nine percent of the country's economy, (this should be compared with the 28 percent obtaining currently in the US,) but even that is thought to be too much by the government as well as the Pakistani elite. Almost nobody pays any taxes at all, only two percent of the 175 million Pakistanis are losers in this particular game of life. Again the figure of ninety-eight percent not paying a single rupee should be compared with the estimated forty percent of Americans who fork over nada to Uncle Sam.
It isn't that Islamabad doesn't need revenue. As a result of the massive flooding of recent weeks, the government is faced by umpteen billion dollars worth of recovery, repair, and reconstruction costs over and above the customary expenditures for a bloated, inefficient, and corrupt legion of civil servants, the building of nuclear weapons, and the appetite of an army always alert and ready for the Indian hordes to pour into Kashmir.
The Carnegie Endowment has issued a blunt report on Pakistan's Nation of Tax Avoiders which pulls few, if any, punches. The financial elite of the country in conjunction with politicians both in and out of uniform have resisted any attempts over the past six decades to install an equitable, progressive system of taxation which would meet the legitimate needs of government. Led by the large landowners of Pakistan's highly lucrative agricultural sector and ably supported by the urban upper and upper middle classes, government after government has backed down from even modest changes in the tax code. It might be noted that agribusiness pays no taxes on anything, ever.
The US and other donor states have been huffing and puffing something fierce over the demands by Islamabad that the taxpayers of "more fortunate" countries spew forth the gushers of money said to be needed in the wake of the flood while wealthy Pakistanis sit back free from any obligation to their own country. Even the Obama administration has detected a lack of fairness in this arrangement.
Washington and other capitals have been placing a surprisingly high degree of pressure on the What-Us-Tax? Zardari regime. While some of the pressure has been applied with a view to encouraging Islamabad to reform the tax system, much has been directed to a much more modest goal--collecting all the revenues to which the central government is currently, legally entitled. Simply getting the money which is owed by the taxable members of the elite today would generate an additional ten billion dollars per year according to the former director of the central bank.
Ten gigabucks annually would not cover the costs of rebuilding but chump change it ain't. You don't have to be Allan Greenspan to understand that.
But, the government of President Zardari hasn't gotten the message. Or, to err on the side of accuracy, it has received the message from abroad, but it has heard a domestic message more loudly. The domestic elites of Pakistan (which includes the military both active and retired) have countered with a resounding and unified, "No!"
Of course it would be impolitic in the extreme for the Zardari government to tell the truth. To say, "Our Mr Bigs won't pony up and any attempt on our part to make them do so simply means they will destabilize the country, at the least, putting their money in Swiss accounts and getting the next flight out of town."
No, the Islamabad Movers and Shakers will be more delicate, more indirect, more implicitly threatening. The man who wrote the cited Carnegie report, Akbar Zaidi, puts it this way. "If you don't help us, the economy will crumble. The Taliban will take over. And, there goes your war on terror."
Zaidi has it right on. Islamabad will go to its default position: Pay up or something horrid but unspecified will occur. It has worked before, time after expensive time. And, it will work again.
It will work not because Pakistan is, as has been claimed so often by American presidents from Nixon to Obama, a key "ally." Pakistan has not been an American ally for more than a half century and isn't going to become one no matter how many greenbacks are shipped over there.
Pakistan has importance to our national and strategic interests for two reasons only. The first is geographic. The overarching second reason is simply that Pakistan is a member of the nuclear club. Were it not for the second factor, the first would be of no compelling moment. There are sufficient pieces of real estate around the world which can serve as (to use the dramatic but less than accurate formulation of President Obama) "the central front."
The nuclear factor is the critical element in the equation. It is what gives Pakistan the muscle necessary to displace the domestic responsibility for flood reconstruction--as well as economic development generally--onto the unwilling (and increasingly unable) shoulders of American and other taxpayers.
The question as to the limits of Pakistan's nuclear based extortion has been raised by a most unlikely champion--the International Monetary Fund. Recently the IMF held back a billion dollar installment of the multi-billion dollar economic stabilization loan taken out by Islamabad two years ago. The reason was Pakistan's failing to undertake a number of agreed upon reforms including a revamping of the tax system.
Previous attempts by the IMF to draw a line in the sand have failed because one or more of the major players invoked Pakistan's "strategic importance." The same dynamic is likely to apply once more. There is no doubt that Islamabad is counting on it.
The donor nations are playing a game of chicken with Pakistan. In the past it has always been the US which has swerved to avoid apparent disaster. The highest probability is that we will do it again--after some "tough" talk from Secretary Clinton, President Obama, and Special Envoy Holbrooke. There will be some harsh words, the pronouncement of an agreement, praise for Pakistan's earnest efforts, some tears for the "innocent victims," and the money will flow again, flow in torrents rivaling those of the river at full crest, and with results not much more beneficial.
There may be a lesson here for the American TEA Party types. All they have to do in order to get the US government to do what they wish is to gain a rudimentary nuclear capacity. Then they will have Uncle Sam by the short ones.
That, of course, is a lesson already well understood in Tehran.
ADMIN NOTE: The Geek invites, welcomes and will post all on topic comments. A spate of spam attacks has forced the deployment of defenses. The Geek apologizes for any frustration or difficulty these may cause.
No comments:
Post a Comment