Taxation and Self Reliance in Gilgit Baltistan

Noor Muhammad

Governments, globally, tax their citizens and use the collected amount for
betterment of the society, through investment in development projects. The
government of Pakistan has set an ambitious tax revenue target of Rs1.779
trillion for the fiscal year 2010-11, 19 % more than the target for 2009-10.
This amount is collected from all parts of the country and all of us, directly
or indirectly, pay the government every day, when we ride a bus, buy petrol
or purchase a packet of salt.

The consumers in Gilgit Baltistan are also paying billions of rupees as

indirect taxes every year. Whether the amount is spent on development of
Gilgit Baltistan, or other regions for that matter, is a different story
altogether. That Islamabad cannot collect direct taxes from Gilgit Baltistan
is because of the fact that people of the region are not constitutional citizens
of the country. Since they are not represented in the national legislative
bodies, according to the universal principle of no taxation without
representation, the federal government cannot levy direct taxes in the
region.

Despite of not collecting direct taxes from the region, the federal
government has been paying a fixed amount of money to the GB
government, to meet its recurring expenditures, as well as cover the cost of
development projects.

With change in the nature of GB governance mechanism as envisaged by

the Self Governance and Empowerment Order 2009, the need for levying
tax in the hitherto non-taxed region is increasingly being felt and debated.
The Gilgit Baltistan Legislative Assembly discussed the need to levy direct
taxes in the region. Whether a consensus was reached on the taxation issue
is unclear because the information has not been made public yet. There are
signs, however, that point towards consensus on selective taxation of big
businesses.

Interestingly, regional office of the Accountant General of Pakistan Revenue

(AGPR) went many steps ahead by deducting 3% taxes from salaries of the
employees of GB government. The uproar against this decision was
deafening and within 36 hours AGPR promised to reimburse the amount with
the salary for November 2010, terming the deduction to be a computer
glitch! Whether or not it was a glitch may never be known but the decision
has further ignited a heated debate across the region. Shall the GB
government levy taxes? A highly contentious issue, indeed!
The naysayers argue that Islamabad controls the region directly, through the
very strong bureaucracy or, indirectly, through the GB Council, headed by
the prime minister himself! Under this setup, the naysayers argue, the tax
revenue is likely to remain under control of the federal government and
establishment, one way or the other. Cabinet members of the GB Legislative
Assembly are already complaining against the lack of power and authority,
as compared to the bureaucracy.

Another argument put forward by the naysayers is that the region is

economically too weak and the taxes are likely to further push the
impoverished majority below the poverty line.

Both of these arguments are valid and make perfect sense. Taxing the poor
is an absurd idea. Also, taxing the people of Gilgit Baltistan under a
federally controlled governance structure is bound to further complicate the
debate about constitutional status of the region and its obligations to the
state of Pakistan. People would, logically, demand justification for paying
taxes to a state that does not offer complete citizen rights to them!

When asked to offer an alternate mechanism for revenue generation, the

opponents of taxation argue that tourism royalty, royalty of the Diamir
Bhasha Dam and Bunji Dam, or the Karakuram Highway, shall suffice for the
limited financial needs of Gilgit Baltistan.

The question that we need to ask ourselves at this point is for how long shall
Gilgit Baltistan be able to sustain, and grow, on the royalty of mega
projects? Is it strategically feasible? Even if we add the Sost border
revenues, or other such future sources, to the list of potential cash
generators, will it be enough and long lasting? Will not our economy be
perpetually dependent on a highly treacherous and vulnerable revenue
stream? Would not the regions dependency on Islamabad further increase,
instead of gradually lessening, as we aspire?

There seems to be no alternate to collecting taxes from Gilgit Baltistan, if

we want to see a robust economy and increasingly self-reliant governance
system. Exactly who will be taxed and in what ratio are very important
questions that need a region-wise debate, in which all stakeholders are
informed and taken onboard.

The present government needs to hold meetings in each village and town of
the region to get inputs from the public and also share information about the
benefits of paying taxes. Shying away from the issue would not help.
Democratic governments take highly unpopular decisions but if implemented
with honesty the healing effects of such bitter pills can be felt by all and
sundry with the passage of time.
The culture of not paying taxes has taken deep roots in Gilgit Baltistan and
it would initially be difficult to persuade the public to pay money to a
government which is already burdened by the allegations of massive
corruption. So, the first step towards winning trust of the masses will be to
purge the government departments of elements who are involved in
corruption.