Will taxation work in Gilgit-Baltistan?

Naseema Parveen

The argument for taxation is clear-cut. If the government is on balance i.e., when the government income equates its expenditures, if the ratio of development expenditure (e.g. education, health, infrastructure, employment generation, agriculture or industries etc) is far more than non-development expenditure, then taxation is beneficial for the common people.

Taxes are the lifeblood of any government; since it is the income of the government and if the government allocates its income in an efficient way, it results in development of the state. Taxation will result in increasing income level of the people of the area and it would increase the employment opportunities if it invests larger part ion development sector.

On contrary if the government is corrupt then there would be no investment in health sector, education sector, industry, agriculture and infrastructure, which results in lack of employment, decrease in income level. However, in this case, the revenue will be in hand of ruling class. States were the tax system is not efficient face problems related to unequal distribution of wealth and the class distribution in the social setup. In such states, the people will be frustrated due to lack of employment opportunities which leads them to social evils such as street crimes.

Historically speaking, the people of Gilgit-Baltistan fought against Dogra rulers and got independence on 1^st November, 1947 and then decided to join Pakistan. Despite this voluntary act, successive governments of Pakistan continuously ignored them, did not accept the accession bid and did not give them citizenship rights. The justification behind this state of limbo was the never-happening UN referendum in Kashmir, for which Pakistan wants to use Gilgit-Baltistan’s votes also. This effectively means that until the Kashmir issue is resolved, the GB people will suffer despite the fact that they got independence and made a choice.

In 1970’s era government had strong ties with china, to connect with this emerging power both the governments built the world’s ninth wonder Karakorum Highway. In 1960,s NGOs started working there and it had changed the living standard of the people by providing education, health facilities and employment opportunities. As compared to those of NGO’s and private sector the Government has been lesser development projects.

Government of Pakistan had given the so called status of province to Gilgit-Baltistan in 2008; there is not a single medical or engineering college in the purported province. Comparing with FATA, which is not paying tax still they have representation in the National Assembly as well as Senate. However the courteous government has planned to implement tax in area, from first of November, which is Independence Day of the beloved land Gilgit-Baltistan. The government of Pakistan has shown its cowardice to give the area position of the province; there is no representation in senate or in the national assembly, so on which are basis, on which it is implementing tax?

Due to its geographical importance Gilgit-Baltistan signifies as the head of Pakistan, G-B connects Pakistan with its foremost ally China; most of the trade between these two allies is through KKH and recently they upgrade it by their mutual agreement. It is heart of the Central Asia, and it is also very significant for West to check on China, India and Russia, so keeping in view all the above aspects, along with the abundance of the unexplored resources in the area if government wants to make the local government self-sufficient it should improve the infrastructure, so that hidden treasure could be explored as well. In addition to that government should attract investors, along with it the government can also improve tourism because the area is blessed with the natural beauty, so that there would be income generation, which would result in improvement of the standard of life. In addition to that the government should complete the Basha Dam project as soon as possible so that energy constraints could be fulfilled as soon as possible and the private investors could invest in the region.

Let’s have a look at the budget of fiscal year 2012-2013, and its allocation in different sectors including both development and non development sector. Total budget for the fiscal year 2012-2013 has been estimated up to PKR 19.39 billion as against PKR 15 billion last year, and the sector wise allocation is as under:

Starting with the power sector, for which the government has allocated as high as 32.2% of the total budget, in which 25 new projects were to be launched in order to generate 14 megawatt power. The proposed projects include Naltar sixteen megawatt and fourteen megawatt hydro power projects, Shargthang Skardu and projects in Chilas and Ghizer district. These projects are to be completed under public sector development programme.  In September prime minister has launched a project to renew 17 km KKH which was submerge by Attabad Lake, at the cost of around 282 million USD, which will be completed in one year. Prime minister announced two billion rupees as a grant for Gilgit-Baltistan during his visit in September for socio-economic development but notification has been issued yet. 3 new projects have been launched with the help of United Nations to save forest and wild life, an amount of 48.5 million rupees have been allocated for this project.

Many of the officials suggest that it is a success of the present government that that budget has been increased to PKR 19.39 billion against PKR 15 billion which was last year. To the non-technical people, this might seem a huge change but, in reality, when compared to the growth rate of inflation for the year it has no outstanding impact since the inflation rate has risen to 11.9%,.

In my view, the success of those in power and the efficiency of corruption is neither success of the economy nor the welfare of the society in any case, if you do not see any improvement in the social setup which could increase the welfare of the people, how would you call it success. Here is when the issue of the accountability and the good governance rises.

Above are few of the many issues which we come across when we try to explore the social issues which are related to accountability, although they remain unnoticed by the common man. Many of the people have misperception that the natives do not pay any tax, but we do pay tax on each and every commodity of the daily use; and in fact the ratio of indirect taxes is far higher than the direct taxes in overall income. On the issue of the imposition of direct tax both the Gilgit-Baltistan assembly and the Gilgit-Baltistan Council has raised a united voice and criticized Federal Government of Pakistan, because up till now it was thought that the said council was the ultimate body for the decision of the matters province, but now the federal government had put aside the local government in such critical decision.

Keeping in view all these circumstance, can anybody decide whether tax would be beneficial for the people of Gilgit-Baltistan? Many of the people emphasize on the normative aspects of the taxation but those are obvious. At the same time, on the basis of past experience, can anyone guarantee the positive outcomes of the taxation?

Since individuals always adopt rational expectation, therefore most of the people obviously would not favor taxation. But this resistance can be overcome if the taxation in the Gilgit-Baltistan works through proper constitution. On the other hand, it needs new minds and new economists to run the system properly which would make the taxation system more efficient. This would work if and only if accountability issues are resolved, by building a fair taxation system in order to have socio-economic development of our home land.

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The contributor is a student at School of Economics, Quaid-i-Azam University, Islamabad.