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Thursday May 19, 2022

Parliament failing citizens

January 23, 2022

The performance of Pakistan’s parliaments (federal and provincial) in discharging their key functions – enacting laws; reviewing/approving government spending and taxation; overseeing the work of government; and debating important issues of the day – has been poor at best, if not negligent. Parliament’s abysmal performance has contributed to the appalling state of the economy.

Our assemblies have never asserted their role as a co-equal branch of government. For over three decades, they have become rubber-stamp bodies, abdicating from influencing budgets, holding governments accountable or debating key economic issues. The nature of debate in the assemblies is akin to a school pep rally, with a lot of excitement but little substance. Legislators’ lack of interest in their responsibilities have made the assemblies ineffective and meaningless in representing the concerns of citizens.

The recent debates on the mini-budget and the SBP Bill were prime examples of the worthless and frivolous parliamentary debates on important issues. The majority of citizens dismiss parliament as chaotic and irrelevant. In abdicating their responsibilities, the assemblies have become ‘partners in crime’ with successive governments for the deep malaise and economic and social mess that Pakistan is facing.

Pakistan’s fiscal meltdown is an example of the failure of parliament in addressing a serious national crisis. If anything, by inaction or approval of bad tax and expenditure policies, the assemblies have contributed to the fiscal crisis which has made Pakistan a beggar state. Here are a few examples of how the ambivalence of legislators has led to Pakistan sinking in debt and in a perpetual shortage of funds to spend on poverty reduction, improving human development and promoting growth.

The Financial Responsibility and Debt Limitation Law requires public debt not to exceed 60 percent of GDP – and parliament’s conduct has been deplorable in upholding this law. The legislators’ lack of interest has led to flagrant violations of the law by successive governments and an alarming rise in public debt and interest expense. Public debt is now almost 80 percent of GDP and interest on public debt is 60 percent of tax revenue. Our legislators’ dereliction in duties means that each newborn is delivered with a shiny debt of Rs200,000. The message is clear: congratulations on your birth, average Pakistani – now pay up for our excesses!

Over the last 15 years, successive parliaments blindly agreed to fiscal deficits totaling almost Rs30,000 billion! No wonder we are engulfed in debt. Legislators have not given any sensible suggestions to rein in the expenditures or raise taxes – the only solutions to reduce deficit.

Examples of serious carelessness include approval of trillions of rupees to support loss making SOEs, finance untargeted subsidies and increase seemingly unending and unjustified perks and privileges of senators, MNAs and MPAs. Legislators, especially those in the provincial assemblies, have been criminally negligent in curbing the huge waste in government. Their lack of interest in this matter is blatant self-interest. Legislators are among the main beneficiaries of the wasteful spending – from providing ghost jobs, contractor driven projects, and subsidies provided to unviable businesses.

Parliament’s failure is also exemplified by Pakistan’s unjust tax system, with the poor bearing the brunt of indirect taxes (eg, GST on essential goods consumed by the poor) and the rich not paying their due share. Indirect taxes are now 65 percent of total tax, with its share rising over the last decade. Year after year, legislators have voted to increase indirect taxes, over raising direct taxes. Most legislators are super wealthy, and they know that more direct taxes will lower their disposable income. Their tax voting behaviour clearly shows that legislators only represent themselves, the rich and elite class, and not the average Pakistani.

Some of their negligent and reckless actions on the tax front include voting for continued exemption of agriculture income tax and very low tax on booming sectors like real estate and the stock market. Under the current economic conditions when inflation is high and disposable incomes of the poor decreasing, it is criminal of legislators to approve the mini-budget through which indirect taxes of around Rs300 billion have been raised. A more just approach would have been to impose a super tax on large corporations, which made profits of close to Rs1000 billion in FY 21, and wealth tax on 200,000 holders of shares whose market value has increased by Rs5000 billion over the last decade. However, as the majority of legislators are beneficiaries of huge corporate profits and obscene wealth gains from real estate and the stock market, they have shamelessly voted for raising revenues from indirect taxes.

Most of Pakistan’s legislators report extremely low income in their tax returns. In comparison to their super wealthy status, their returns smack of tax cheating and tax avoidance. Moreover, the taxes paid by legislators are insignificant when compared to the expenditures on the legislative bodies. Total income taxes paid by senators in 2019 was a laughable Rs100 million, in comparison to the Rs3800 million spent on the Senate. National Assembly members paid a pitiable Rs400 million of taxes, while Rs5600 million were spent on the National Assembly.

In the Punjab and Sindh assemblies, members paid a trivial Rs140 million and Rs70 million of taxes respectively, against spending of Rs3200 and Rs2800 million. In a laughable irony, our shameless legislators don’t even raise enough revenue to meet their own costs. The taxes paid by these several hundred super wealthy is reprehensible and a slap in the face of honest taxpayers. The legislators have no individual or collective realization that their tax paying habit sets the tone for the rest of the taxpayers. They are utterly negligent in their duty of being role models for taxpayers.

Finally, the grossly inadequate time devoted to the budget debate is a clear example of how nonchalantly the legislators take this function. In many well-functioning parliaments, budgets are debated over several months. However, in Pakistan the legislators always accept a ‘rush job’ for passing the budget. At most, a few weeks are given for budget review and not more than several days for budget debate. More time is spent bickering on TV programmes than in the assemblies themselves.

Most crises facing Pakistan have partly resulted from legislators not doing their job for which they have been elected and for which they are provided huge perks, privileges and honour. In the interest of giving Pakistan’s 220 million citizens a bright future, the national and provincial legislators must spend less time on TV talk shows and more time on seriously discharging their duties – especially their responsibilities in respect of approving sound tax and expenditure policies and holding governments accountable for results.

The rise or continued fall of this country will be decided by our fiscal sustainability – will our rich parliamentarians finally embrace their role to make Pakistan a prosperous and respectable nation, or will they continue to support bad policies which will promote begging and borrowing in perpetuity?

The writer is a former adviser to the World Bank.

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