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about Asia Buzz
Subcontinental Drift: The Tax Test
Musharraf must show he is tougher than Bhutto and Sharif
By APARISIM GHOSH
JUNE
1, 2000
Web posted at 1:00 p.m. Hong Kong time, 1:00 a.m. EDT
Watch closely now as General Pervez Musharraf faces his first real test of will
since seizing power last fall. On the surface, the 13-city tax survey that began
May 27 is a routine bureaucratic exercise, designed to collect basic financial
data on businesses. But the survey will also show if Pakistan's dictator is the
tough guy he claims to be.
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A highly corrupt and ineffective tax system is at the root of many of Pakistan's
economic woes. Of the country's 140 million people, only 1.2 million pay income
tax. And most of these are middle-class wage earners; wealthy landowners and
businessmen pay next to nothing. Every democratic government in Islamabad has
sworn to correct this anomaly and widen the tax net, but every attempt at reform
has been stymied by--who else?--the landowners and businessmen. It didn't help
that Prime Ministers Benazir Bhutto and Mohammed Nawaz Sharif were themselves
products of the élite and notorious tax-dodgers, as were many members of their
cabinets.
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Musharraf's October coup was supposed to change all that. His apologists at home
and abroad claimed tough economic remedies--like tax reform--could only be
administered by a totalitarian regime that, unlike democratic governments, was
not beholden to the electorate or the élite. But the dictator has thus far shown
himself to be as reluctant to dish out bitter medicine as his predecessors. Now,
nearly 8 months after taking charge, he's finally gotten round to addressing the
country's most pressing economic problem.
What is the survey meant to achieve? Finance Minister Shaukat Aziz says it will
help identify evaders, particularly those in the business community. These folks
will then feel the full force of the law--stiff fines and jail terms. In a
year's time, if all goes to plan, the tax base will have expanded to 2 million.
Musharraf has invested a good deal of his personal prestige and credibility on
the exercise, decrying tax evasion as shameful and vowing to bring offenders to
book.
But many of Pakistan's businessmen and traders are adamantly opposed to the
exercise. They argue that the tax department is riven with corruption and its
officials cannot be trusted to conduct an honest survey. Some commentators say
this is just an excuse: the businessmen simply don't want their books examined
for fear of being exposed as tax evaders. Whatever the reasons, many merchants'
groups have launched nationwide strikes to protest the survey; in several
cities, entire markets have closed down at the approach of the tax officials.
This sort of unrest has forced previous governments to abandon reform plans. In
the past couple of days, Musharraf's regime, too, has retreated somewhat from
its take-no-prisoners stance; Finance Minister Aziz has offered to negotiate
with irate merchants and business leaders if they reopen their shops and
establishments.
Musharraf can't afford to back down any further. The widespread public support
for his coup has waned with his inability to deliver on his promises to stamp
out corruption and revive the economy. Another failure, and many Pakistanis will
begin to wonder whether their military ruler is any different from his civilian
predecessors. For the general, this is the moment of truth. Watch closely.
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