Zalimo jawab do, tax ka hissab do, was the plaintive slogan shouted outside Defence Housing Authority and Cantonment Board Clifton’s offices this week after residents demanded why they did not have drains even though they had been paying ‘taxes’. For residents of any other part of Karachi this seemed rather strange for they do not shy from eviscerating the KMC or Sindh government or KW&SB when it comes to roads, pipelines, garbage. The difference here was that for the first time perhaps, publicly, embarrassingly, people were calling DHA out on it.
Can DHA charge taxes as a housing authority? And if it can, is there anything in the law that specifies the nature of the relationship between a tax-payer and the entity that receives that tax? I asked lawyer Abdul Moiz Jaferii, the co-host of SAMAA TV’s Agenda 360, this question and others as part of a second in-depth look into DHA and cantonment law.
For your ease we have separated the points (and edited them for clarity and brevity), but they are, by and large, interconnected. We recommend reading the first article of this two-part series before launching into this one. Do please leave any additional questions you may have below in the comment section.
Can DHA legally charge taxes?
Just by calling it a tax doesn't mean it is a tax. DHA does not have the permission to tax. Their regulations list the ways in which they can make money. They can take a transfer fee, amalgamation fee… they can take different fees from you.
The general power of taxation with all cantonments is according to property. Or it is taxation according to your footprint in the cantonment. So it's called a ‘tax’ but in truth it is a ‘fee’. The difference is that with a fee there is a quid pro quo—meaning, when you are giving something, you are getting something in return.
How do taxes work in general?
The general power of taxation with the State is that whether it’s your property, money or land, it can extract from it. If you have Rs100, the State can take ten rupees to run itself. The State can decide to give two rupees out of that Rs10 to the poor. It can decide to spend what is left on a new Prime Minister House. This is the general use of taxation.
What is the difference between taxes and fees then?
Fees do not work like taxes. If you have taken property tax—and your cantonment rules bind you, which they do, on what you are allowed to do with that money—you can spend it on improving the cantonment. You can spend it on the welfare of the people of the cantonment. You can give its people ten different amenities. You can gauge how big their bazaars can be. When it is like this, you are not giving a tax. You are giving fees. And the person you are giving the fees to has to answer how they spent your Rs100. You can ask them to first tell you why you have to pay Rs100 as such. You can ask them to tell you where they spent that Rs100.
So DHA residents can hold DHA accountable for the fees they paid?
The DHA board has an audit that goes to its governing body. The law and its own regulations say that the audit takes place every year. So the protestors last week were asking for an independent audit because it was not deemed as such.
The residents should ask for these audits to be released. Because in DHA/CBC it isn't as if you have nuclear silos. It is a residential and municipal authority. Releasing its figures will just lead to transparency. No danger will be created. It can't be used for a conspiracy.
DHA and the no-profit-no-loss principle...
These audits are also binding on DHA as it should operate on a no-profit-no-loss basis because it is an authority and financial extraction is not its job (nor is that within its jurisdiction). Its job is to spend what money it gets on the premise set out in its law. (When the Pakistan Defense Officers Housing Authority was formed in 1953, its basis was the welfare of its members.)
The world over, charity or welfare organisations are rated. There are A-grade charities, B-grade charities. There are methods of assessing this. How much work is it doing? How transparent is its work? How many people is it helping? But the basic premise for the rating is to see how much you spent on running yourself out of that Rs100 you collected and how much you spent on actual welfare. How much was your administrative cost?
If you are spending Rs8 out of every Rs10 on yourself, then you are not an amazing charity. Therefore people should know in the very least, how much the DHA board is spending on itself and how much of the money it collected will it be spent on them. Because if I have given Rs100 and the quid pro quo of that is Rs80 spent on DHA salaries, then the 20 rupees left over do not justify DHA taking that whole Rs100 from me. These quid pro quo questions are completely justified and completely legal.
Also, for example, to return to the quid pro quo and welfare principle: every cantonment the board has to ensure, for example, there is enough water. DHA wanted to be only be answerable to itself when it came to municipal services, so it formed a cantonment. But even after so many years, half of DHA doesn't get potable water. Its law says that it will provide services, amenities, health, but there is not a single public hospital in DHA.
Can DHA/CBC sell its land? How do the leases work?
A lease gives you the power under the law which cannot be undone without the use of the law. If you have bought the lease to this house, the gentleman who sold it to you cannot that easily just take it back. It becomes an established contract between you and the State. There is a whole process if you want to cancel it. They have to prove that you have violated your lease. And you have to prove that you did not violate your lease. And so the concept of a lease is fairly permanent.
This did not exist in the Cantonment Act, 1924. Now when you are going to sell plots to people, you're not going to do it on a piece of paper. You have to give them lease hold rights. They were all made according to the by-laws.
There is nothing in the cantonment laws that say you can cut out a plot and sell it. In fact, the cantonment laws prohibit this. Land will not be sold. Disposal of lands by the military estates officer is specified in Chapter 5 of the Cantonment Land Administration Rules, 1937. The sale of land with any purpose without definite orders of the federal government is prohibited.
Obviously, all of these leases that have been given must have the signature of some representative of the federal government (this still highlights an intent that these cantonments are in the form of a trust). It is not that you can just mark off one thousand plots and sell them. The law's text does not permit this.
Other cantonments, DHAs exist across Pakistan. They seem to run better. Why is that so?
This may stray into political territory here. But one answer is that Karachi was the experiment; all the lessons learnt here were applied to the final product in the other provinces.
When other DHAs are formed they need provincial enactments (or laws). We see that they are considerably different from this one. And before they undertake urban planning, the provincial DHA regulators thought that they should ask the people whose job it is, such as urban planners, to weigh in. But no one bothered with this in Karachi.
What should DHA’s residents do now so matters improve?
They should ask for the audits to be published. They should ask for the publication of those figures. They should ask, when a plot is transferred and DHA asks for money, why does it take so much? When DHA keeps taking this money, where does it go? And who makes the decision on where that money will be spent? And why are DHA’s residents not involved in that decision-making? Why are elected representatives not involved in this?
For example, when drains had to be made (which is the first duty of any master developer) DHA took money from me. And when those useless drains are made, you tell me, ‘Well, at least thank the Lord we made them.’ As if you have done us a favour. Where was the quid pro quo there? How much money was collected? How much was spent? Were you even authorised to collect that money because the money you collected earlier had to be first spent here. The transfer fees you took from me, the amalgamation fees you took… these were all taken so you could make our drains. So where is this money going?
Why has no one challenged this so far? Has DHA been taken to court?
No, people don't take them to court. But when their rights are usurped, people do go to court when they have no choice, to challenge the taxes, or permissions. And where cantonments start to get really creative and start taking professional taxes, the courts do tell them that they do not have the right.
This is, to give full disclosure, not a complete answer to that question. There is complicity and selfishness [at work too], but the entity you are going to challenge is very powerful.
History tells us that those who have so much power with such little accountability will not do anything on their own. Therefore, the direction should come from the federal government that should say that these housing authorities should operate as housing authorities should. There should be accountability, transparency, and wherever there is no justification for cantonments or never was, the federal government should take them back and then decide if they want to run them through the provinces.
If the [federal government's] allergy to the Sindh government continues then they should run these housing authorities themselves. But they should run them like a civilian set-up and not always give the excuse on any work that it is interference in military affairs.
This goes to the heart of ending fragmented local government in Karachi as well.