The budget for FY 2013-14 presented by Finance Minister Ishaq Dar and approved by Parliament has been received with comments of appreciation and criticism from several quarters. Yet, it was an uphill task for any budget planner to present the budget in an extremely precarious and alarming economic environment like the non-availability of sufficient financial resources to meet urgent basic development needs of Pakistan. Nevertheless, I have listened to the Finance Minister’s speech, and comments of some economic experts, and am confused about proper perspective of the real solution of our resources gap in the future.
I, however, dare to give some solutions for overcoming our problems related to fiscal deficit, challenge of low percentage of tax to GDP, and elimination of massive corruption involving loss of billions of rupees as a result of mega frauds committed by state enterprises in collusion with the politicians; and also, as a legacy of the outgoing PPP regime costing an estimated amount of about more than trillions of rupees to the national exchequer on account of enterprises like Pakistan Steel Mills, PIA, PICL, Pakistan Railways, OGDC, OGRA, EOBI, and land grabbing specially in Sindh. As time passes, more and more mega frauds will surface.
One of the major problem is the collection of tax revenue, which is presently budgeted at Rs 2,450 billion as against last year’s collection of Rs 1,943 billion out of a target of Rs 2,381 billion. Apparently, the present target seems on the higher side. It will require serious and radical reforms and efforts to meet this target. Thus, the following solutions are proposed.
According to former Chairman NAB Admiral (retd) Fasih Bokhari, “corruption of more than Rs 8 billion takes place daily in Pakistan.” It looks like fiction. In fact, the Admiral should have been confronted to prove this mega amount in the prime interest of Pakistan, and for the sake and benefit of 90 million people living below poverty line. If this is true, it amounts to the most serious and worst crime. Those responsible for it should have been brought to justice. While the blamer has walked out without any accountability, he has created the impression of doubt and gross incompetence.
It is important to realise that Pakistan is a poor country with a population of 180 million, which can be classified as follows: earlier, 30 percent of our population numbering 54 million was below poverty line that has risen to nearly 90 million, as stated by the Finance Minister and Minister of Planning and Development. It is, therefore, obvious that this population of 50 percent cannot come under taxable net. The remaining 90 million is, perhaps, taxable, out of which 40 percent, i.e. 36 million, may belong to the middle class. The 30 percent, i.e. 27 million, middle and upper middle class may have the capacity to pay income tax from Rs 300,000 to 1,200,000 per annum, the remaining 20 percent, i.e. 18 million, who maybe termed as rich with taxable capacity of Rs 3 million per annum, and the last category of 10 percent, i.e. 5 million, are fabulously rich by Pakistan’s standards and maybe called billionaires and some of whom may be billionaires in dollars, including banks and major business conglomerates that have the capacity of taxable income to any ceiling. The direct tax on these categories of 90 million after the exclusion of 90 million who are below poverty line may mitigate the sufferings of the poor. I was pleased to hear Mohammad Mansha, the owner of Muslim Commercial Bank Limited, stating that the rich should be taxed higher.
Undoubtedly, the imposition of tax on the rich and highly rich requires courage, boldness, and skill to convince these wealthy taxpayers to support higher taxation. For instance, take the case of five leading banks of Pakistan. They are earning huge profits. The maximum profits are made by Muslim Commercial Bank around 20 billion and Habib Bank Limited near about this figure. In the 70s and 80s, maximum bank profits were around 400 to 800 million. I am not giving reasons of the high profits, as their earning per share are many times higher than before.
Moreover, the tax on banks’ profit was around 55 percent, which has been gradually reduced to 30 percent. Therefore, I suggest that banks, particularly these five banks, should be asked to establish social welfare departments and, if possible, schools and hospitals for 90 million poor people in areas allocated by the government. Even otherwise, in a country like Pakistan, it is highly desirable that people living in destitution and misery deserve much more relief.
Having said that, I will quote a very interesting and humanitarian example of a senior Rockfeller. His family was very rich. In 1930, the world faced great recession and suffered a loss of trillions of dollars, throwing millions of people out of job and shattering trade and business. It took many years for the world to recover. Rockfeller went to a priest and told him about his wealth. The priest advised him to spend in God’s way. Thus, Rockfeller started building schools, colleges, universities, research centres and hospitals for the poor, in addition to houses for senior citizens. He followed the advice in letter and in spirit. He wrote in his biography that in due course, he came to know that at least 10 percent of whatever he spent in God’s way came back to him. So, I quote the promise of God for those who spend in His way, as contained in Ayah 261 of Surah Baqra (Cow): “The parable of those who spend their possession for the sake of God is that of a grain out of which grow seven ears, in every ear a hundred grains for God grants manifold increase unto whom He wills; and God is infinite, all-knowing.” It means that Allah can multiply beyond 700 times because He is infinite.
The next solution for raising revenue, to a considerable extent, is the imposition of tax on the income of agricultural landowners and big landlords (to be categorised) on their net income after meeting all expenses like other trade and business. It is an uphill task for the government primarily for political reasons and this should be accomplished with coordination and cooperation. The taxable class of agriculturists should be persuaded with logical and passionate appeals to make the sacrifice and pay direct tax on their income of agriculture to alleviate the sufferings of the masses. This will be a service for the well being of Pakistan and millions of Pakistanis, who made historic sacrifices by migrating from India suffering unbearable losses of life, property and honour. We should be thankful to God that we are living in our own country and progressing, and having too much wealth that could not be dreamed of. There are examples of outstanding success of numerous men in Pakistan belonging to different professions who rose to highest pinnacles of their careers. As Field Marshal Mohammad Ayub Khan, in his book “Friends not Masters”, wrote he could not dream of becoming the Army Chief and, subsequently, Field Marshal. In the case of rich people their duty is to serve Pakistan sincerely and have faith in the promise of Allah, unlike false promises of our politicians.
Another solution that comes to my mind is the documentation of economy. It can generate a huge amount of revenue. This is called informal economy running parallel to formal economy. It is managed/operated by traders, businessmen and others; mostly, the black and untaxed money is used in the informal economy without any documentation and this is done to avoid income tax. According to economists, the loss of income tax on informal economy may be more or less equal to our present budgeted figures.
Currently, Pakistan is the poorest country in the comity of nations and its progress depends on taking bold measures to make it an ‘Asian Tiger’. However, we should first define the parameters of an Asian Tiger. The previous PPP regime was drenched in corruption of unimaginable scales for mega frauds. Hopefully, the PML-N government, headed by Prime Minister Nawaz Sharif, would set up a research cell to study Turkey’s history when it was facing a crisis like Pakistan. In spite of 100 percent inflation, more than 100 percent interest rates on deposits, and more than 120 percent rates on loans, it overcame the crisis.
Further, Pakistani people, especially the rich, are widely thought to have placed their money in foreign banks, offshore banks, including Swiss banks that are known as tax havens. According to a former Minister, if the government can get hold of 100 richest people and prevail upon them to bring their foreign balances in Pakistan, there will be no need of foreign loans from international agencies like the World Bank, IMF, etc. So to recover billions of dollars from outside, pragmatic schemes will have to be devised. It requires well-thought-out plan to convince the rich to voluntarily come forward and bring their money back to the country. If the PPP’s President by skill and political cleverness can rule Pakistan for five years, in spite of massive corruption, mis-governance, and anti-Pakistan policies, it should be the responsibility of the present rulers to discharge their responsibilities with good intentions for the sake of Pakistan. No doubt, it imposes a challenge, but for a right cause. In this, the cooperation of the bank Presidents, who are drawing huge salaries and perks, has to be sought.
Also, the State Bank should be regulating bankers’ salary structure to narrow the wide gap between the lowest paid and highest paid. Nevertheless, I propose that the present government may invite practical schemes from bank Presidents and other experts from the Finance Ministry for repatriation of billions of dollars from abroad. May Allah give PM Nawaz the courage to introduce difficult solutions proposed by me for Pakistan’s salvation.
Ex-Finance Minister (late) Dr Mahboobul Haq, the most able and competent development economist, was in favour of taxing agriculture income and also wanted documentation of the economy. Unfortunately, Haq carried his wish to the grave.
Finally, I will for obvious reasons like to apologise to the class of people, who may be affected by my solutions made without any mala fide intention or personal interests. However, I apprehend an angry backlash from quarters unknown. Yet, I will appreciate comments from the readers.

The writer is a former president of United Bank and former chairman of Pakistan Banking Council.