Friday May 17, 2024

When corruption fights back, the main casualty is economy

By Mansoor Ahmad
June 29, 2019

LAHORE: The prevailing culture of tolerating collusive behavior, exploitation, and organised cartelisation is the reason that Pakistan lags behind the rest of the world when it comes to market competition, while political will to support anti-trust agencies is also very weak here.

The judicial system in Pakistan does not work efficiently. The procedural delays upset the writ of honest regulators. There is a need to reform the system to make it efficient. Corruption is now a norm in the country because of its complex legal structures, undue discretionary powers enjoyed by public servants, absence of international accounting/audit standards, and weak public accountability.

Cases relating to enforcement of contracts, nonpayment of loans, fines imposed by regulatory authorities should be decided quickly through regular daily hearings as it would increase the comfort level of genuine local and foreign investors.

Fight against corruption is generally a long-term effort and consequently may span successive political administrations. That makes it critical for anti-corruption efforts to remain politically neutral, as a national goal and above personal or political interests.

In the absence of transparent policies and systems for selection and appointment of public officials, clearly stated procurement procedures etc, the social evils like nepotism, favouritism, and even “sale of vacancies” may continue to thrive.

Moreover, in the absence of transparent systems, the concerned officials have a great propensity to exploit the situation to extort bribes. Empowered public officials with vast the discretionary powers is used to extort bribes out of businessmen or individuals. The government officials use their discretion in issuing licenses, tax certificates, customs clearance, etc and can be decisive in creating market forces in favour of a particular person or company.

All these factors are having an adverse impact on our economy. Our efforts to increase revenues face stiff resistance from the rent-seeking bureaucracy that stands to lose a lot if transparency is ensured.

Our past efforts to increase revenues failed because it hurt the vested interest of bureaucracy. It resulted in poor or no funding to meet our social needs. Today our education system is in mess and costly private schools have crowded out government schools that failed to impart quality education. Our health sector has similarly been taken over by the expensive private sector. Our road infrastructure is weak; our canal irrigation system needs massive repairs.

The time has come that we have been forced to cut spending even on essentials like security. Imposing value-added tax is a hard nut to crack for the Federal Board of Revenue that should take immediate steps to close the avenues like under-invoicing and non-documented productions to ensure tax compliance at retail level.

The measures announced in the federal budget 2019-20 are tough and hit poor the most. Some measures were announced to unearth the hidden wealth. It was expected that the government would be firm on those measures like it is on the measures impacting the poor. But during the revenue minister’s budget speech it was revealed that the powers of revenue officers to raid residence in search of hidden dollars and wealth have been withdrawn. This is deplorable.

This government first sent a feeler that the bank lockers would be searched. This prompted most of those that have stashed high value currencies and gold in bank lockers to take them out and hide it in their residences. It was then announced that residences would be raided and now the orders have been withdrawn. Who will benefit from this withdrawal, the rich or the poor?

The government is not prepared to withdraw taxes on everyday items like sugar and edible oil. But the state is giving safe passage to tax evaders by withdrawing the right to raid their residences.

In India the tax officials regularly raid residences to uncover hidden wealth and concealed documents. Why can’t this be done in Pakistan? The government would be able to collect higher taxes after regular devaluation of dollar.

This is also an indirect tax on the poor. Every imported product or input has become extremely expensive as besides higher value of the dollar the importers have to pay import duties on higher values and on duty-paid value they have to deposit sales tax at a rate of 17 percent.

This government should improve competition regime, control cartels, apprehend hoarders, and eliminate-rent seekers in bureaucracy with the same spirit with which it is trying to milk taxes from the poorest segments of society.