News Analysis: Pakistan’s two halves?

ISLAMABAD: The latest austerity steps announced by Prime Minister Shehbaz Sharif to trim expenses across the top tiers of the government fail to address a fundamental gap – the ever-growing gap between Pakistan’s haves versus have-nots.

This followed the latest message from the top tier of the International Monetary Fund (IMF) to go beyond just slapping whopping fresh taxes across the board. Public remarks by IMF’s managing director Kristalina Georgieva urging Pakistan “to function as a country and not to get in to a dangerous place where its debt needs to be restructured” have been a timely reminder of the long overdue actions that have yet to be taken.

The facts as stated by the IMF’s top official calling for more equitable taxes and withdrawal of subsidies except for the poor, go far beyond just the steps announced by the prime minister.

Though a succession of Pakistan’s ruling elite have repeatedly failed to accept the writing on the wall, the powerful reality of the economic slide is far too glaring to be ignored.

And defence minister Khawaja Asif’s public remarks this week conceding that Pakistan has become a “bankrupt country” smacked right in the face of the official view.

In spite of fast galloping inflation all around, a growing resource gap between the rich and the poor speaks volumes about Pakistan’s increasingly dismal outlook.

It is the outcome that has not just followed Pakistan’s intense recent negotiations with the International Monetary Fund (IMF) to unlock a stalled loan.

The divide has indeed progressed over decades as Pakistan’s well endowed ruling class and their supporters have repeatedly gained benefits of patronage from the state, often at the expense of already marginalized communities.

Eventually, it is hardly surprising that the quality of government-provided essential services notably healthcare, education and security for individuals has slipped badly over time. In the process, Pakistan has become a classic case of a country that has been captured by a cross-section of its well endowed elite.

And the reality of that mismatch is clearly evident at the well stocked upper class stores across the country, catering to the tastes of the rich and famous. From Parisian perfumes and other expensive brands of makeup to imported foods, the prices on offer are well beyond the reach of the common household.

Notwithstanding finance minister Ishaq Dar repeatedly patting himself on the back for his lineup of non-success stories, the repeatedly failed finance czar will definitely fail if assigned to prepare the monthly household budget based on the minimal official wage.

To Dar’s credit goes the legacy of creating a new class – ‘filers’ versus ‘non filers’- that have deepened Pakistan’s economic divide. Already indebted to Pakistan for repeated tax evasions, the rich and mighty non-taxpayers have conveniently equipped themselves with well displayed opulence, conveniently using the ‘non’ category to display their wealth.

Consequently, the number of BMWs or Audis or Mercedeces Saloon cars on the streets of Pakistan has just swelled during the past decade or so.

Meanwhile, prices of real estate across some of the most sought after neighborhoods have skyrocketed unimaginably for average Pakistanis. In brief, the divide between the rich and the increasingly marginalized mainstream Pakistanis has widened as never before.

A terrible fallout from this trend has marked a further weakening of the state and its institutions. Amid a societal change with the few flourishing nouveau riche armed with wealth that has been gained without full or even partial transparency, the incidence of corruption has visibly grown.

Those with unaccountable and large-scale wealth have made deeper inroads into Pakistan’s institutional structures such as local governments, administrative structures across the board, municipal administrations and tax authorities.

In this background, Prime Minister Sharif’s austerity drive is neither impressive nor meaningful. Pakistan needs to venture more powerfully towards imposing across the board direct taxes on stakeholders with means, while stepping away from indirect taxes that target everyone without exemption.

If such an exercise is carried out honestly, the outcome will leave many to conclude that just the targeting of the agriculture sector that remains a provincial subject, is an exercise in futility. Pakistan’s many businesses and industries remain partially or almost fully exempted from a meaningful income tax, with evasion flowing through the widespread patronage given to the few resourceful ones.

For any one looking to witness a historical drama tied to tax evasion, it would be useful to watch the 1987 thriller ‘The Untouchables’ based on events that eventually brought down the Chicago gangster Al Capone. The film with the cast including stars such as Kevin Costner, Sean Connery, Robert De Niro and Andy Garcia is both entertaining and insightful.

Capone, once the most feared gangster of Chicago, was eventually brought down by a team led by US prohibition official Eliot Ness (so skilfully performed by Costner) on a tax evasion charge. It is time for Pakistan’s equivalent of Chicago mobsters of the 1920s to meet a similar fate.