The UK Government should help Pakistan boost its disastrously low tax revenues by breaking down global financial secrecy and helping the country get information on Pakistani citizens’ accounts in Britain and other tax havens, development agency Christian Aid has told MPs.
Tax dodging is currently the norm rather than the exception in Pakistan, with both companies and individuals evading taxes on a staggering scale, according to research by Church World Service – Pakistan/Afghanistan, a North American based partner agency.
The current situation deprives the country of the funds it needs to provide essential services such as health care, clean water and education, as well as disaster prevention and human development for millions of people living in poverty.
Christian Aid made its suggestions about the UK supporting aid spending in Pakistan with policies to help the country raise her own resources in evidence to MPs on Parliament’s International Development Committee. The Committee is conducting an inquiry into UK aid to Pakistan.
"One important way for the UK to help Pakistan become less aid-reliant is to assist it in catching up with tax dodgers. Part of the answer is to help the Pakistani tax authority get access to information about the finances of Pakistani citizens’ offshore accounts," said Joe Stead, Senior Economic Justice Adviser at Christian Aid.
He continued: "The UK should commit to providing as much information as possible to Pakistan and work with other rich countries to put pressure on tax havens to do the same, giving tax dodgers fewer places to hide."
Pakistan currently suffers from extreme tax dodging, with less than two per cent of its citizens paying income tax and an estimated tax gap of almost 80 per cent, according to research by Church World Service - Pakistan/Afghanistan.
The tax gap is the difference between the amount of tax which should be collected, if tax laws were obeyed, and the amount that actually is collected.
This gap leaves the country heavily dependent on foreign aid and unable to fund basic public services, leaving tens of millions of its 177 million people living in extreme poverty.
Lack of tax revenue also has a devastating effect on Pakistan’s ability to invest in protecting its people from the many disaster risks which threaten them, including earthquakes, cyclones, droughts and floods.
Pakistan’s national disaster response system focuses mainly on responding to emergencies and ignores the need to prevent disasters by tackling their root causes, says Christian Aid’s evidence to the MPs.
"There is clearly a need for more donor support from DFID (the UK’s Department for International Development) to address these issues but…the Pakistani government could generate more resources internally through enhanced revenue generation and allocation of public spending on disaster risk reduction," it adds.
Christian Aid’s evidence also stresses the importance of strengthening local communities’ resilience to disasters, for instance with training and help to prepare for the inevitable impact of disasters, so that they can be more self-reliant and less dependent on aid.
Finally, the evidence warns of the need to improve humanitarian organisations’ accountability to the people they help. Christian Aid partners’ research shows "the need to include voices of women and children in response and targeting [of humanitarian aid], to eliminate discrimination against minorities and to address what it describes as the “one-size-fits-all” approach in design of relief packages, which can add to survivors’ sense of deprivation."
* Christian Aid evidence to the UK Parliament’s International Development Committee can be read here: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmintdev/writ...