While 2015 marked the deadline for the millennium development goals (MDGs), the UN had already started preparing a new development agenda. At the Rio+20, the UN conference on sustainable development held in 2012 in Brazil, the UN member states decided to build on MDGs and spearhead a process to launch a broader and more comprehensive set of sustainable development goals (SDGs).
The conference acknowledged that ‘poverty eradication is the greatest global challenge facing the world today’. In view of this, the United Nations development group (UNDG) selected 11 key themes for global consultations related to the post-2015 development agenda. These themes covered various facets of development challenges and included conflict and fragility, education, energy, environmental sustainability, food security, governance, growth and employment, health, inequalities, population dynamics and water. To have a diverse and comprehensive global representation, 88 national consultations were held across the globe with over one million people from diverse backgrounds and age groups.
Following this, a report titled ‘A Million Voices: The World We Want’ was released by the UN in 2013 where participants prioritised issues such as ending extreme poverty and hunger, accomplishing gender equality and improving health services and increasing access to education for every child as their foremost concerns. The participants wanted the future development agenda to primarily address these issues.
During its 70th session in September 2015, the UN General Assembly adopted the post-2015 development agenda as ‘Transforming Our World: The 2030 Agenda for Sustainable Development’. Focusing on 17 sustainable development goals (SDGs) and 169 targets centered around people, planet, prosperity, peace and partnership, it has been committed to eradicating global poverty and combatting inequalities.
To implement the 2030 agenda and accomplish the highly ambitious SDGs, unprecedented financial and technical resources as well as high level political commitment from numerous stakeholders at the local, national, regional and international levels is required. To this end, it has been mentioned under the SDG 17 to forge a renewed and reinvigorated global partnership for sustainable development. The document states that the global community is “determined to mobilise the means required to implement this agenda through a revitalised global partnership for sustainable development…with the participation of all countries, all stakeholders and all people”. While developed countries have been asked to increase their aid levels and accomplish their commitment to reach 0.7 percent of ODA/GNI, there is also emphasis on developing countries to increase domestic resource mobilisation including improving ‘domestic capacity for tax and other revenue collection’.
In this context, it is interesting – rather alarming – to analyse the ‘tax behaviour’ in Pakistan. According to Pakistan 2025: One Nation-One Vision, “The tax-to-GDP ratio is 9.7 percent and it is lowest in the region”. It must be emphasised that countries at the same income level have 14-15 percent tax-to-GDP ratio on average. According to the UK-based International Centre for Tax and Development (ICTD), since 1980, the overall tax-to-GDP ratio in Pakistan has mostly remained in the same range: less than 10 percent. It is also quite embarrassing that in a country of about 200 million people, only one million are registered taxpayers.
Globally, along with other factors, tax, investment and exports are strongly linked to economic growth and prosperity. In Pakistan, private investment has fallen by nearly half between 2006-07 and 2012-13 – from 15.4 percent to 8.7 percent –accompanied by sharp drops in both foreign and domestic investment. Exports have also fallen from 12.5 percent of GDP in 2007-08 to 10.7 percent in 2012-13. The government has planned and reiterated in several policy documents that tax-to-GDP ratio will be increased to 16-18 percent by 2025 in line with comparable countries (India 16 percent, Turkey 19.7 percent and Thailand 18.8 percent in 2012) by broadening the tax base and reforming the taxation system.
Although business and indirect taxation have increased in recent years and efforts have been made to stem tax evasion, the state seems to have failed to elicit taxes from the government elite, large landowners and big industrialists who are heavily represented in the government and civil and military bureaucracies. And here is the main dilemma which creates distrust among people who question the very philosophy of taxation and who are already indirectly taxed in one way or the other. To this end, it is imperative for any government to restore trust and confidence among its citizens that their money will be spent on their welfare and will not end up in some offshore companies or in real estate ventures in Dubai, New York, London or Singapore.
That is why the 2030 agenda has specified that for accomplishing the SDGs, accountable and inclusive institutions, “good governance, rule of law… and measures to combat corruption and curb illicit financial flows will be integral”. Currently, track record of numerous countries in various regions, including Pakistan of course, is far from satisfactory regarding good governance and rule of law. For example, a Washington-based think tank, global financial integrity (GFI), has found that illicit financial flows (IFFs) from developing countries have continued to rise.
In its 2015 report, it has stated that during the 2004-14 period, countries in the developing world across various regions have lost an aggregate of $7.8 trillion in IFFs. (For example, the Ayyan Ali case in Pakistan – alleged money laundering and currency smuggling). Similarly, the prevalence of corruption has been a huge issue in most developing countries and a World Bank study has mentioned that over $1 trillion is paid in bribes annually. Stressing the importance of good governance and control of corruption and how it affects the development trajectory of a country, the report adds that if a country having per capita income of $2,000 addresses the issue of corruption and takes measures to improve governance and rule of law, its per capita income level could reach $8,000 in the long run.
In sum, it is vital for Pakistan to take the issue of good governance and rule of law very seriously. Once people begin trusting their country and its institutions and have firm faith that the taxes they pay are eventually used for their welfare, the tax behaviour will change in the long run. However, for that to happen, inspiration will come from the upper level – leadership. If the ruling elite evades paying taxes, even honest people would start finding excuses to avoid paying taxes.
The writer is a postdoctoral research
fellow at the German Development
Institute at Bonn, Germany.
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