Sunday, 16 August 2015

Non-Filer Blues

Policy making in Pakistan is an amateur parlor game—everybody plays policy on TV, in drawing rooms and wherever they like and all without reading, investigating or learning about how the rest of the world makes policy. And let me hasten to add this is not just the current PMLN government—all governments in our history have done this.
Some powerful person in their tremendously busy VIP schedules picks up stray ideas. Bureaucrats beholden for their careers to the powerful people, rush to implement these suggestions. No time to think, investigate, understand—after all development must not wait for thought, debate and investigation.
None of them even think that some of these ideas may be self-serving and perhaps a further investigation may be required. 
Nowhere is this more apparent than in tax policy.  All of us live with new and crazier proposals every few weeks. Arbitrary taxes on energy, Internet, school fees, cars, houses, consumption, mobile phones, bank transactions, airplane tickets—the list just keeps growing. Yet the SROs, subsidies to outmoded industries that have not been modernized in decades continue financed by these arbitrary taxes. Similarly the untaxed perks and plots to the henchmen of power grow at taxpayer expense too. 
No one questions this strange system and the people docilely pay these taxes that are now becoming almost as onerous as the Ancien Regime in France.
If you notice every now and again the government forms a tax reform committee comprising mostly of industrialists—and often the same industrialists. Yes the same ones who benefit from subsidies and SROs. The committee meets like a parlor game. There is no study, no expert advice, only princes playing policy. 
Let us not forget the donors who have for over 30 years provided huge amounts of money to their consultants who come with policy advice that is hastily implemented.  Can we please ask them to explain these crazy taxes? Do the advanced countries have such arbitrary taxes every week?
The pet peeve of the donor and the SRO lobby is the nonfiler! And they have connived from ther plush Islamabad houses a plan to make nonfilers suffer.  Oh yes, high theory is used here. Give them an incentive to file by penalizing everything that nonfilers do.  Here are some results:
Well I met Daud Rashida who has for 30 years worked in the Middle East working 14 hours a day, dutifully sending money to his family that he sees once a year while trying to save up for a nest egg for retirement. He remains a Pakistani since no one will allow him to stay in the Middle East.  The new penalties for nonfilers are biting him hard. He is rushing about trying to address this situation from oversaes. Of course it will be settled but at a price. What will the government collect? Nothing. A bribe will fix the problem. Maybe the bank will keep some of the amount withheld. But Daud will surely suffer!
Meet Jani khala of Yalan. Her husband died 25 years ago leaving her with some savings in Behbud that she is living off.  She has a house in Gulberg that her hardworking and hard saving husband left her and that greedy eyes are all looking at enviously. Outwardly khala appears very rich and yes her house is valuable. But she skimps and saves to live on her limited bahbood income that inflation has viciously eaten away. Her children who are in the US send her some money occasionally that she puts in her bank saving up for her medical expenses. Once a year they send her a ticket and she goes to see them.
Now she has gone into a deep depression. The bank is taking money for her transactions. She does not understand why? She is a traditional woman with limited knowledge.  Vultures are circling around her. Some with proposals for bribing FBR, selling/exchanging her property, managing her money! But then she should get no sympathy she is a non-filer. But Behbud is non taxable. She has no taxable income.
Farid Hayat a student with no background but great ambitions has a scholarship, works 2 jobs to pay for college and a future. Unfortunately he puts his money in a bank and needs internet and has to pay college fees. He had saved money to buy a car but now is in deep trouble. He is not a nonfiler. He has been trying to file the best he can because he is too poor to afford an accountant. But the Bank and the car dealer treat him as a nonfiler. He has been wasting time trying to prove he is a filer but of course being powerless he will have to pay a fee.  So his plans must change.  Should he drop out of school?
Elina Aslam an enterprising young woman saved up in her night nursing job to buy a car and start a car rental company.  Hard work and frugal life style led to enough savings to allow her to add another car to her rental business.  She never really made enough to warrant a serious tax return. But now she cant buy a new car since there are all kinds on non-filer penalties she has to face. Furthermore, now putting money in a bank has become expensive, Elina is keeping her cash at home and lives in dread of robbers.
She is thinking of selling her business at a loss and reverting to night nursing.
These are just some stories of how poorly conceived policy disrupts lives. Nobel prizes have been won on understanding how tax policy must be neutral not disrupting lives. Yet our policy dilettantes know better. 
Much experience shows how simple tax policies with a clean, competent tax administration can multiply revenues but of course our dilettante advisors and their henchmen—donor consultants—know better. Their suggestions on taxing the chicken coop, the lavatory and kitchen will surely create much despair.   

(Names used here are all fictitious for obvious reasons. They are derived from famous economists—see if you can guess)