Stop extra aid to Pakistan unless taxes increase: UK report

Britain should withhold extra aid to Pakistan unless it does more to gather taxes from wealthier citizens, damning parliamentary inquiry report said, as UK plans to double assistance to Islamabad.

London: Britain should withhold extra aid to Pakistan unless the country does more to gather taxes from its wealthier citizens, a damning parliamentary inquiry report has said, even as UK plans to double its assistance to Islamabad.
The UK`s Department for International Development (DfID) plans to increase its bilateral programme in Pakistan from 267 million pounds in 2012-13 to 446 million pounds in 2014-15, making Pakistan the largest recipient of UK aid.

But, the report called on the UK government to focus on anti-corruption measures and ensure the rich Pakistanis pay taxes before any increase in bilateral aid.

"Pakistan`s rich do not pay taxes and exhibit little interest in improving conditions and opportunities for Pakistan`s poor. The UK, as a leading donor and long-standing friend of Pakistan, must raise the issues of corruption and tax evasion at the highest levels," said the House of Commons International Development Committee (IDC) report released here today.

"Any increase in the UK`s Official Development Assistance to Pakistan must be conditional on Pakistan increasing its tax collection and widening the tax base. We cannot expect the people in the UK to pay taxes to improve education and health in Pakistan if the Pakistan elite is not paying income tax," it adds.

Based on data from the Pakistan Board of Revenue, the committee expressed surprise that only 0.57 per cent of Pakistanis paid income tax last year and that no one has been prosecuted for income tax fraud for at least 25 years.

It also found that less than 30 per cent of Pakistan`s members of Parliament pay tax.

"We fear the DfID country strategy for Pakistan is too `supply driven` with insufficient ownership by the Pakistani authorities. The UK development assistance programme needs a proactive partnership with evident Pakistani commitment... How Pakistan chooses to reform is a matter for Pakistan but clearly there needs to be reform to improve the country`s services and social indicators," the report stresses.

An inquiry into the aid programme was launched back in 2012 to delve into the rationale for the large increase in the budget and where it was to be spent.

The report notes that while the UK had decided to end financial grants to India, there is a case for an increase in aid to Pakistan because of the extent of poverty as well as due to the security situation in the country.

However, the report also warns that the education programmes being supported in Pakistan had little to do with preventing extremism as hoped by the UK government.

"The connections between education and extremism are unclear. The UK government believes that education will counter extremism, but others are sceptical," the report concludes.

In light of the committee`s findings, DfID stressed that any increase in aid will be "predicated on a commitment to economic and tax reform".

"We have made it clear to government and opposition politicians in Pakistan that it is not sustainable for British tax payers to fund development spend if Pakistan is not building up its own stable tax take.

"Following the election we will make available practical assistance to the incoming government to help deliver reform of the Pakistan tax system and work with the IMF, but tax and economic reform must take place," a DfID spokesperson said.

Education will be DfID`s largest programme in Pakistan, absorbing half of the bilateral aid programme.

Other key areas include governance, security and maternal health, with smaller programmes on humanitarian assistance, wealth creation and vulnerability.