Chaklala Cantonment Board: Making a fool of those who pay taxes

Published: June 10, 2013

Economists would tell you that cutting taxes on certain populations can spur growth by increasing their disposable income. That is true, but they would also tell you that this equation is disproven when it is the rich who benefit from tax breaks. PHOTO: FILE

Taxes. Everyone hates them, everybody tries to get around them, but at the end of the day, they serve an important purpose. Taxes are the only thing that keep a government afloat. Well, international aid also applies in the cases of many third world nations, but that is a different story.

Pakistan has ridiculously high rates of direct tax avoidance, mostly by businesses and the upper class, but even at the lowest levels, tax-free smuggled goods and handwritten ‘kachi’ receipts deprive the state of indirect taxes. The federal board of revenue regularly comes up with tax amnesty schemes to try and bring avoiders and new taxpayers into the fold, usually with minimal success. For this reason, rates on the salaried class are kept relatively high, and indirect taxes — the most anti-people form of revenue generation — keep rising.

In line with the centre’s anti-people tax policies and avoidance of necessary transfer payments, the Chaklala Cantonment Board has come up with a brilliant plan to increase tax revenue — cutting property taxes by 200 per cent.

To repeat, the CCB claims tax avoidance has cost it money. So the solution is to cut taxes and reduce the existing revenue, without taking any real action to address avoidance, such as taking action against tax defaulters or running fresh property surveys to check if people’s houses and their tax payable — which is based on Revenue Department records — match up.

Economists would tell you that cutting taxes on certain populations can spur growth by increasing their disposable income. That is true, but they would also tell you that this equation is disproven when it is the rich who benefit from tax breaks. This is because the rich already have high disposable incomes, and they would simply save money saved through tax breaks, while the poor have little disposable income, and would spend any extra money on goods and services, often out of necessity rather than extravagance.

Cutting taxes on property owners in Rawalpindi’s posh areas benefits only the rich homeowners. Poor people rarely own their houses, and those who do usually live in shacks that are too small to tax.

Making this move even more anti-poor is the fact that reduced revenue will mean reduced availability of funds to spend on development work, which is supposed to be aimed at the underprivileged.

Also, cutting rates is not the way to get delinquent taxpayers into line. Stern action through fines and other penalties is. Tracking them down shouldn’t be hard. Cantonments are among the most regulated residential areas in the country. It would be appalling to learn that a cantonment authority in the country’s ‘military capital’ does not know who owns which house. But then, there are other interests at play.

The CCB controlled area is full of retired military staff, and it would be unsurprising to learn that a large share of the tax evaders used to wear khaki in their youth.

Many military officials are exempt from property taxes on houses within certain covered area restrictions. So are widows and people in a number of other categories. However, many older houses are torn down and rebuilt without permission.

Numerous cases exist where revenue records show pre-partition three-bedroom houses on plots where the actual buildings are palatial multi-storey marvels. Because of apathy and corruption on the part of revenue officials, the tax payable by these homeowners is based on the original survey, because property surveys are few and far between. More often than not, the only people who get checked on are the ones who follow the law and apply for permission to build a new structure. To add to their misery, permission is often refused.

These problems can be addressed by computerising land records and conducting regular surveys. But that won’t happen. How is a low cadre revenue official going to build a ‘crorepati’ mansion if no one greases his palm?

Similarly, revenue gap issues can be addressed by taking a fresh survey and fining people who have lied about the size of their property, and those who haven’t even bother to try lying. Get all the taxpayers into the net before cutting rates, because the only message cutting the tax rate sends to those already paying taxes is – you are fools.

Unfortunately, the sad reality is that anybody who thinks the cantonment boards of Rawalpindi are even slightly concerned about the welfare of non-khaki residents really is one.

Read more by Vaqas here or follow him on Twitter @vasghar

Vaqas Asghar

Vaqas Asghar

A sub-editor on the Islamabad city pages of The Express Tribune, Vaqas holds a Master's degree in IR from Iqra University. Before joining ET, he taught history and was also a member of the editorial staff at Blue Chip Magazine. He tweets as @vasghar (twitter.com/vasghar)

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • Nadir

    Cantonment boards are strategic assets and must be appreciated. Civilians should be thanful that they are allowed to live near officers and gentleman. For that right it is important that only civilians pay taxes.Recommend

  • sleepless

    Civilians should be thankful to officers and gentleman that they are allowed to live near them. It is a great honour, infact so great, that civilians should work at their houses, tend to their gardens and pets, and provide free baby sitting services.

    “Every country has an army, Pakistan Army has a country”.Recommend

  • sleepless

    And please keep in mind that Pakistan and all assets of the Government of Pakistan, including the Army, are a sacred trust of all the civilians ‘who should be thankful for being allowed to live close to officers and gentlemen.’

    And the salary for these officers and gentlemen is paid through the tax imposed on ‘civlians’.Recommend

  • Shah (Berlin)

    @sleepless:

    and the officers pay their taxes..unlike rich politicians…!!!!!!!Recommend

  • Falcon

    Vaqas – An informative article. But this is a known issue in property taxation. The trouble is that because of perceived high property taxes, most of the transactions are undocumented and show much lower value of the property than its prevailing market value. So the tax revenue base is already much smaller than theoretically possible. From an economic policy designer’s point of view, it is a trade-off to make the tax net wider at the cost of being unfair to existing tax payers. It is quite possible that this might be a scheme to legitimize tax evasion, but justification of the policy maker should be evaluated as well along with pertinent data. But question remains how far are we willing to go in the continuous use of the carrot for the elite of the country without using the stick?Recommend

  • rad786

    @Nadir/sleeples: You’re joking right? Civilians thankful to the army? Yes we must commend them for something that they should be doing in the first place, i.e. their job. Oh wait a minute. The army performance hasn’t been excatly stellar for the last decade or so. It has been amazingly incompetent at weeding out terrorist elements in the tribal belts to the point where the country security-wise is in the same place it was six years ago. But things like cantonment boards, land-grabs by the DHA, and billions of rupees in losses in scams like NLC are indeed feathers in its cap. All of which by the way have nothing to do with its actual raison d’etre. Thank you Pak army … thank you so much!!Recommend

  • faisal

    Would some one write an article regarding the E tag lane in lahore cant. The road has been built by my taxe, the soldiers standin on duty are getting paid from the same tax i pay. Than why should I pay a token to enter lahore cantt where i live in the name of preferential security.Recommend

  • Salman (Bloody Civilian)

    @Nadir,
    “allowed to live near officers and gentleman”…… lol
    Just look at the language this person is using;
    In fact it should be army men who should be thankful to civilians for feeding them, for their lavish livings throughout their lives and tolerating them for doing nothing for national borders. Yes, they do a lot of other things, killing, kidnapping, and looting their own people and national resources and yet think that civilians are some third rated, untouchable creatures.
    Recommend