Paying for Pakistan
By Mohsin Hamid
Friday, 07 May, 2010
Here’s the great secret about Pakistan: we aren’t as poor as we like to think. Over the years I’ve travelled a fair bit around our country. I’ve ridden on the back of a motorbike in Gwadar, walked down streets in Karachi, explored bazaars in Peshawar.
I’ve hiked in Skardu, fished (unsuccessfully) in Naran, sat down to a meal in a village outside Multan. I’m no expert, but I believe what my eyes tell me. And there’s no doubt about it: times are incredibly tough.
For most Pakistanis, meat is a luxury. Drinking water is contaminated with urine, faeces or industrial chemicals. School is a building that exists only on paper or otherwise employs a teacher who is barely literate. Electricity is so intermittent as to be almost a force of nature, like rain or a breeze.
The budget says our government plans to raise in taxes about Rs1.5tr this year. There are some 170 million people in our country. So that comes to roughly Rs9,000 each per year. Which is a little over Rs700 for each of us every month.
That isn’t much. Yes, we get money from other sources. We borrow, and sell off state assets, and ask for aid from anyone willing to give it to us. But still, what we can raise ourselves in taxes accounts for most of what our government can spend. And when you’re looking at getting enough power plants and teacher training and low-income support and (since we seem intent on buying them) F-16s for the world’s sixth most populous country, the equivalent of a large Pizza Hut pizza in taxes for each of us every month doesn’t go very far.
Why isn’t Pakistan delivering what we hope for? Because of dictatorships, or India, or the Americans? Well, maybe. But these days a large part of the reason is this: we citizens aren’t paying enough for Pakistan to flourish.
On my travels around our country I haven’t just seen malnourished children and exhausted farmers and hardworking 40-year-old women who look like they’re 80. I’ve also seen huge ancestral landholdings and giant textile factories and Mobilink offices with lines of customers stretching out the door. I’ve seen shopkeepers turn up to buy Honda Civics with cash. I’ve seen armies of private security guards, fleets of private electricity generators. I’ve seen more handwritten non-official receipts than I can possibly count.
Many of our rich have tens of millions of dollars in assets. And our middle class numbers tens of millions of people. The resources of our country are enormous. We’ve just made a collective decision not to use them.
We pay only about 10 per cent of our GDP in taxes. (Our GDP is our total economy, what all of us together earn in a year.) Meanwhile, Sri Lankans pay 15 per cent of their GDP in taxes, Indians pay 17 per cent, Turks pay 24 per cent, Americans pay 28 per cent and Swedes pay a fat 50 per cent. We Pakistanis pay a pittance in comparison.
And that is fabulous news. Because it can change. Raising taxes doesn’t depend on foreign policy, getting a wink from Uncle Sam or a nod from King so-and-so. It doesn’t require a breakthrough in technology or a year of good rain. It’s under our control.
What would happen, for example, if we raised tax revenues by a fifth, so from 10 per cent of GDP to 12 per cent? Well, that would give us Rs300bn a year. We could use that to rent a million classrooms for Rs10,000 per month, give jobs as teachers to a million graduates for Rs15,000 per month, and ensure that every single child in our country received a decent education. By raising taxes to the level of Sri Lanka, 15 per cent of GDP, we would generate additional revenue equal to twice our official defence budget. Match India at 17 per cent of GDP and the additional money would equal a staggering 25 times our current education, health and housing budgets combined.
So if you are a progressive who wants the state to do more to help the poor, you should support more taxes. If you are an industrialist who wants to see that Taliban recruits are rehabilitated and retrained, you should support more taxes. If you are a professional who wants electricity and better police, you should support more taxes. If you are an anti-American who wants us to stop taking US aid, you should support more taxes. If you are a diehard militarist who wants us to buy lots of F-16s, you should support more taxes.
The only people who shouldn’t support more taxes are those who think that the situation in Pakistan right now is already too good.
Taxes are the big hope for Pakistan. It isn’t complicated. Anyone who says we can’t solve our problems or afford to give our people a decent standard of living isn’t telling the truth. We can afford it. We’ve just chosen not to.
This is where our democracy can make a difference. We have elected our representatives. Horribly imperfect as they are, they represent us. And because they represent us, they have the right to ask us to act in our shared self-interest, to contribute more to the collective pot that is Pakistan. It seems they are starting to do so. And perhaps rampant inflation and a dozen hours of loadshedding a day are making even many formerly comfortable and tax-averse citizens more amenable to change.
But what about corruption? Yes, there’s no doubt that much of officialdom is corrupt. But so are we, the citizens. Every time we accept a fake receipt, or fail to declare a bit of income, we are stealing from our country in precisely the same way our politicians and bureaucrats are. Our thefts as taxpayers might be comparatively small, but that is because taxes are so low in our country to begin with. At the moment, we feed off each other. As we citizens start to display more probity in tax, we’re likely to demand more probity in how our money is spent, and our strengthening courts and media are likely to help us get it.
The tax revolution is not going to happen overnight. It will take time. But there is good reason to hope it is coming, and to slowly shift the weight of our votes, our accounts and our attitudes to support the right side.
A brighter future awaits us if we’re willing to pay for it.
The writer is the author of the novels Moth Smoke and The Reluctant Fundamentalist.
