All annual budgets of federal and provincial governments for the last four decades, especially tax proposals through finance bills, have strengthened elitist structures. The year 2021 has been no different even as millions of citizens are in dire need of money after three waves of Covid-19.

The Pakistan Tehreek-i-Insaf governments in three provinces and the Pakistan Peoples Party government in Sindh have only raised indirect taxes. Not a single tax has been levied on the rich to generate funds to help the needy.

Our elitist economy serves the rich and offers little to the deprived classes to ensure social mobility. Elitist structures reflect in all sorts of discrimination — in taxation, extorting money from the poor for the benefit of the rich; in academics, non-availability of quality education for all; crony capitalism of creating monopolies and denial of finance to brilliant young entrepreneurs to start and compete with established businesses; rent-seeking opportunities created through state policies for politicians in power; and the failure to provide social services to the masses.

In its essence, the constitution is egalitarian. However, exploitation of all kinds continues unabated although Article 3 says: “The state shall ensure the elimination of all forms of exploitation and the gradual fulfillment of the fundamental principle, from each according to his ability to each according to his work”.

For decades, Pakistan has been a captive to a military-judiciary-bureaucracy complex, landed aristocracy, industrialists turned politicians, wealthy traders, influential ulema, pirs and business tycoons. Flouting the rule of law with impunity is their hallmark. Since they pay negligible income tax, the redistributive function of personal income taxation is absent. In the year just ended (FY 2020-21) these taxes came to Rs 1,738 billion or 3 percent of the GDP at the federal level and 0.06 percent at the provincial level.

The military-judiciary-bureaucracy complex, politicians and absentee landowners represent less than 1 percent of the population. They enjoy unprecedented perks and benefits at the expense of taxpayers. In the federal and provincial collections for fiscal year 2020-21 their contribution to income tax on agriculture and non-agriculture dropped to a ridiculous level.

On an average, a rich non-salaried individual having an annual agricultural income up to Rs 4.8 million in the current financial year (2021-22) will pay 15 percent tax as compared to high-paid salaried professionals of 25 percent on the same income. Meanwhile, those providing employment to millions pay corporate tax of 29 percent plus many other levies and suffer double taxation on dividends.

How can we achieve sustainable growth without new investment and rapid industrialisation? The Federal Board of Revenue (FBR) collects nearly 45 percent of the taxes at the import stage (the ratio in most countries is no more than 5 percent). Hence, the collection of Rs 4,731 billion is mostly (over 65 percent) from indirect taxes.

Shaukat Tarin, yet another unelected finance minister, wants higher and sustainable growth that is not possible through tax codes discouraging savings and investments. The elitist business groups are not ready for competition and want “protection” through high tariffs to deny buyers the right to buy cheap quality goods. The rich-poor divide will widen through such tax policies. There will be a greater concentration of wealth in fewer hands while the poor pay a tax every time they talk on mobile phone for longer than five minutes.

Growing inequalities in income and wealth are a serious issue in Pakistan. Regressive taxation is further aggravating the problem.

The state is obliged under the constitution to provide free education and arrange healthcare for all. The governments, federal and provincial, are not fulfilling their constitutional obligations and have given a free hand to private parties to fleece people in the name of providing health and education.

There is no will to tax these commercial ventures and spend the money on improving public schools and hospitals. On the other hand, clubs, golf courses and rest houses serving upper echelons receive grants from public funds.

How public servants thrive on the taxpayers’ money and exploit foreign funding is an open secret. Most of them get scholarships from foreign agencies to attend elite universities in the United States. Their children, born during their stay abroad, automatically get US citizenship. When they return to lord over poor Pakistan, their children go to the finest schools and live in public estates nobody in the West can imagine.

After high school, the US-born children apply to the finest universities in the US, and get not only admissions but also financial assistance as they fill out financial aid applications and only provide information about their parents’ nominal salaries in rupees. After graduation, they stay there and easily land jobs because they are Americans, thus providing a comfortable beach head for their parents.

No wonder the Finance Act 2021, passed by the parliament on June 29, has not levied a single progressive tax on the rich to bridge the fiscal deficit of nearly Rs 4 trillion. On the contrary, taxes have been raised for the poor and the middle class. At the same time borrowing from banks and elsewhere continues to push the nation towards the dark abyss of the debt prison.

Foreign debt alone is now about $120 billion. The elite are happy as their life is not affected by Covid-19 or any taxation. The burden of indirect taxes is finally passed onto end users. It becomes confiscatory for the extreme poor.

Sufferings of the poor and the less-privileged classes will not end unless the society is restructured on the principles of equity, fairness and justice — the fundamental elements of a constitutional democracy. The problem in Pakistan is not scarcity of resources, but an unjust distribution.

The first step should be taxes for public welfare and monetisation of all perks and perquisites of judges, generals and civil bureaucrats who must pay tax on a fairly-determined consolidated pay package as others are doing. Giving them consolidated pay packages according to market wages would reduce corruption, remove the sense of elitism and improve governance.

Without these reforms and fiscal decentralization [Article 140A of the Constitution], we cannot hope to achieve rapid growth or ensure equal opportunities and jobs for millions of young people.

The writers, lawyers, writers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members   

Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE).