The prime objectives of creation of the NSS financial system were twofold. Benefit to the public and the government.
For the general public it provides:
1. An investment-based guaranteed stream of regular income for the aged, elderly, lower middle-class, private sector workforce, retirees, devoid of pension and State Social Security income, after having reached retirement age and or confronted with physical handicaps/disabilities limiting individual income generation capabilities.
2. Create an accumulated overtime, profit-generating savings pool for middle and lower class working earners to:
a. Purchase a home.
b. Pay for their offspring's education.
c. Cater to their children's marriages.
d. Cater to old age healthcare expenses, etc.
NSS schemes benefitted the government in soaking up its citizens’ disposable cash, curbing excessive consumer spending, inhibiting general inflation and making available a stable long-term pool of public funds for governmental use.
A significant number of NSS customers are barely literate, some illiterate, and a minor percentage educated. Most are non-tax filers, not even capable of opening and operating a simple bank account. This can be verified by policy-makers if they take the trouble to visit a couple of National Saving Centers in small towns.
This educationally-handicapped, low-income segment now bears the brunt of the 30pc tax, being non-filers. Effectively they have been left to fend for themselves in seeking higher (than the now modest) returns in a sophisticated investment market which they are not equipped to deal with. The majority may remain tied to the NSS due to lack of awareness of higher yield options and the skills needed to play such markets.
In fact, these small NSS investors will be left out in the cold, to the mercy of cut-throat Double Shah Ponzi schemers, fly by night operators, offering irresistible profits on the face value. Pakistan has witnessed these scam artists on a national level, first hand, and more than once. Con artists, who have fleeced millions and escaped the clutches of the law with connivance on part of compromised law-enforcement agencies.
NSS's intended beneficiaries, the ordinary individuals, middle and lower class, self-employed, the Shoudha’s wives and widows, retired bureaucrats, judiciary members, armed forces personnel and the likes from every cross-section of societies’ lowest financial rung seeking reasonable returns on their meagre savings will face diminishing income streams, which coupled with inflationary price trends in Pakistan, will further strain their efforts for a crime-free white-collar survival.
A government promoting Riasat-e-Madina ideology is obliged to provide care and support for its old, frail, weak, handicapped, marginalised, sufaid poash segments of the society.
In conflict is a government generating revenue from taxation on savings-based income of this lower and middle-class segment. It is a harsh and without compassion measure, in conflict with the humane principles.
The state would reap greater social benefits and goodwill by offering higher profit rates to the hard working, small savings NSS investor as compared to the benefits of poverty elevation programmes such as Ehsas, Benazir Support etc. which seek to alleviate poverty of programme recipients without contributory inputs on part of the recipients. In essence, such distribution of government’s resources creates a dole dependent segment in a society already burdened by a substantial unemployed population.
Taxing profits of the small savings investor also disincentivises the poor and lower working classes to invest in the NSS, possibly diverting their savings to alternate risky investment options such as undeveloped property holdings, traditional gold and silver (ornaments) hoarding, effecting negatively the economy and leeching cheap capital for govt use out of govt control.
Taxing profits of the rich and the corporate world generates (painless to lower classes) additional revenue for the govt’s coffers, whereas taxing income of the poor, retired working middle-class who exist sans a viably functioning social safety net, pushes NSS beneficiaries towards or further below established poverty levels in the country's already largely impoverished society.
The NSS savings instruments are a secure and guaranteed financial contractual agreement, unchangeable in terms and conditions. Arbitrary changes in terms and conditions through short-lived ordinances and govt’s directives are moves bordering on the near illegal as would be the case of increase of taxes on NSS profits and financial instruments issued on past dates. Revised tax rates should not be implemented on the NSS financial instruments issued retroactively in all fairness.
A dearth of adequately-beneficial social safety networks as in health, education, disability assistance, etc. further highlight the need of increased govt’s financial support to masses nearing to, or having ended, their healthy productive life span and also in need of increased old age health support.
Instead, it appears the state is poised to scale down this one and only NSS simple investment platform without alternate investment platforms on the horizon for their mostly just literate masses, incapable of operating in the likes of this country's stock exchanges.
The government's 50pc increase in tax on NSS profits constitutes a substantial reduction in profit earnings of the lower segments of the society.
It is pertinent to understand the objectives of this 50pc tax increase on the NSS profits has not warranted a single line pertaining to revenue generation in this year's govt budget. A sudden announcement in the press after passing of the national budget reeks of mala fide intent, effecting millions of our already vulnerable.
On face value, it seems the state aims to release capital parked with NSS (govt) to new owners, Pakistan's commercial sector banking, which will again loan a major bulk of this holding back to the government and the general public, at higher and more profitable returns to them.
Forcing reduced savings profit rates on an economically weak segment of society is the exact opposite of a genuine welfare state's objectives.
Let's not pounce on the vulnerable while Ehsas programme and other related schemes are bearing results in helping the poor. Those surviving on meagre incomes from NSS and living a hand to mouth life will now start a tougher new struggle for survival.
(Muhammad Ijaz-ul-Haq is president of PML-Z, and Muhammad Tariq is PPL's former board member, ex-director marketing of Shaukat Khanum Cancer Hospital.