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Black Holes in Revenue Gathering

A recent survey conducted by a research company assisting in the TV Licence Fee Campaign 1998-99 PROJECT VIEWFINDER is very revealing. In the first two months of the campaign, 27% of the people belonging to low-income group area had purchased TV licences whereas 14% of those classified as middle income group and less than 6% of the affluent group had done so. In areas like Defence Housing Authority Karachi, out of 50 houses on one street, nearly every house having a Dish Antenna, only 2 had obtained TV licences and even they had not paid for the Dish Antenna. Amazing as it may seem but those who can afford to spend Rs 250 for a single sandwich at one of the mushrooming fast food outlets are averse to paying Rs.250 as annual fees for a TV licence. On the other hand, at the other extreme the poverty stricken, and this includes the rest of the middle class in the present economic environment, are far more responsible with respect to their public obligations. If you study the proportionate value of the licence fee to the annual earnings of the low-income group and compare it with that of the affluent, the factor of greed and indifference to civic responsibilities among the well-to-do is unimaginable. Analysing the wide discrepancy the company concerned came up with some startling findings, among them viz, (1) those on the poverty line are very concerned about socio-economic facilities, as such they tend to fulfill their obligations far more than the higher income group who take it as a God-given right, their conscience feeling no responsibility towards paying their dues to the State and its agencies (2) the poor income group fear the threat of court summons and police involvement whereas the affluent have no fear of either (3) for the poor the TV licences is another piece of documentation as proof of ownership and occupation of their house while the rich want to avoid such documentation and (4) the prize draw scheme attracts the poor but causes little or no excitement for the affluent who already possess whatever is on offer. These observations are a shameful reminder of the sad lack of social conscience among the affluent. As the last day before penalties and surcharges are applicable approaches, the announcements on TV and print media, encouraging TV set holders to purchase licence, have become slightly tougher in tone. One of the solutions proposed by the collection agencies is also revealing, lists of defaulters are being prepared which are intended to be published in local newspapers. Court summons are also being readied to be sent in an inverse ratio to purchases, affluent income group 10, middle income group 3 and 1 for low income group. Most of those who default, particularly in the affluent group, will probably end up paying even 10-15 times more than the original sum other than the embarrassment and the unnecessary time consumed between court, bailiffs, police station and bank. That experience should be a powerful enough incentive to dissuade them from avoiding taxes and duties in the future, at least the dues against utilities.

Most of this country’s problems stem from the fact that those who have gained most from the largesse of the State do not want to pay taxes but evade them by relying on “bribes and connections” to escape the clutches of the law. The fact that only 1 million or so souls are registered as taxpayers, mostly the salaried class, is a disgrace. At least 3-4 million more taxpayers are evading registration, every one million taxpayer means Rs 100 billion approximately to the exchequer. This is a staggering Rs 300-400 billion direct loss to the public exchequer, more than the debt repayments, defence expenditure and cost of running government all put together. Similarly as regards Sales Tax registration and Central Excise Duty, the evasion is staggering. In Rawalpindi Sales Tax Region alone, over 9,000 units of coal mines, stone crushers and brick manufacturers are not registered, each capable of paying Rs 100,000 annually at the very minimum. This amounts to an evasion of Rs 9 billion. However with the active connivance of tax enforcers, Rs.7,000 per month per unit for NOT registering (a cool approximate Rs.60 million a month or Rs.72 crores per year), very few of the units, if any, are registered and those that are, hardly pay 5% of what they should. The present GST issue is an outrage perpetrated by the PM’s favourite constituency, the retailer business community. Retail shops in all the markets are stocked full of goods, to survive the smallest shop must sell not less than Rs 1,000 per day, in Liberty Market Lahore sales are nearly Rs 3-4 million a day. Similarly jewellery shops sell as much as Rs 5-6 million a day, if not many multiple amounts more. Yet these traders refuse blatantly, not only to pay a fraction of what is actually leviable but refuse to get registered at all. Brazen-faced about their defiance, they are holding the PM and the country to ransom by holding strikes regularly, denying consumers access to necessary consumer items. Rather than succumbing to threats and blackmail, the government should withdraw “law and order” cover from those who do not get registered as well as banning issuance of arms licences to them. If their shops and houses are looted or vandalised, their FIR should not be registered at any Police Station if they are not registered as GST payers. Furthermore one can only assess the amount looted if the GST declaration gives an approximate value. In the same manner what is the proof you own a TV set or VCR unless you have a valid licence? Without the requisite licences they cannot be included in the list of stolen items. This may seem an invitation to loot, anyone who does not subscribe financially to the public exchequer towards maintaining of police cover does not deserve to be secured or protected by the State and that also at the expense of others who pay their dues. The State may well look after them as private citizens but as professionals and their place of work thereof can only fall under the ambit of the State when they start paying their taxes. Moreover the citizenry should be encouraged not to purchase any item from them unless they are registered —and paying GST.

The only way to get our citizens to pay their respective dues is to decentralize taxation down to the elected Local Bodies level. For the governance of any country it is most important that there is meaningful people’s participation at the grassroots level particularly for a country like Pakistan, in danger because of both external and internal pressures, of descending into anarchy, it is vital that we turn to the concept of Local Bodies governance immediately. And to make them fully participant, elections to the Local Bodies must be held on the basis that anyone who gets 5% of the vote will be elected to the Council. Theoretically one could have a maximum of 20 people on a Union Council (comprising approximately 250,000 population with less population in sparsely populated areas). Five Union Councils should make a District i.e a District will have 1 million population but more important almost everyone in that constituency will have some representation in the Council. That Council then becomes very important for governance for many reasons, not the least being to assess and collect taxation. Having good knowledge of the people living in the area, the Council would be able to do effective tax collection, keeping one portion for local use and sending the major balance to the District, Province and the Federal Governments on a proportionate basis.

Centralized and compartmentalized taxation allows rogues and scoundrels free rein to use expensive accountants and lawyers to good effect, with active connivance by public sector officials. Without effective revenue gathering and expenditure roles for elected representatives in their own respective communities, the context of governance is lost in democracy. Corruption is so rampant through the entire spectrum of the tax collection agencies that entire files, even pertaining to court cases filed, are lost. If they are not, a senior “authorised” or “competent” authority will simply “condone” the offence, for a “price” of course. At the bottom end i.e the poor, have responsibility and conscience engraved in them, sadly this is lacking mostly in the affluent class as can be seen from PROJECT VIEWFINDER where TV Licences have been purchased in low-income areas four times more than in affluent groups.

PROJECT VIEWFINDER has been a tremendous litmus test about the conscience of the nation’s wealthy, it shows clearly that the rich not only do not have either conscience or responsibility to pay their dues to the public exchequer, they are not ashamed about it. In such a case the only weapon the State has is to withdraw various facilities that the State makes available to such citizens on a focused basis.

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