Pakistan’s military establishment biggest business group: UNDP

Pakistan’s richest 1% hold almost a tenth of its total income
Apr 15, 2021
Photo: AFP
Photo: AFP

Pakistan's military establishment represents the largest conglomerate of business entities in the country, reveals a United Nations Development Programme report called 'The three Ps of inequality: Power, People, and Policy'.

The report said that Pakistan’s military enjoyed Rs257 billion in privileges in 2017-18 and it is the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects.

The military’s business activities are essentially run through two entities, the Fauji Foundation (FF) and the Army Welfare Trust (AWF), with high net profits and rapid growth.

The military’s Defence Housing Authorities (DHAs) also enjoy significant privileges in terms of federal sales tax exemptions and the earmarking of property tax, which goes solely to cantonment boards.

The report's biggest takeaway, however, is the damning statistic that Pakistan’s elite – the top 1% of its population - has 9% of the country’s total personal income.

“The average income of high net-worth households is six times the income of an average Pakistani household,” the report said. “Despite this, high net worth individuals evade taxes worth Rs168 billion.”

The report highlighted the stark contrast between the elite rich and powerful and the underprivileged. The extensive study quantified the privileges such tax benefits the country elite and powerful groups such as feudal landowners were attracting.  

The poorest 20% of the nation hold 7% of the national income while the richest 20% have 50% of the national income.

The elite also enjoy substantial concessions, such as tax credit provisions which reduce their personal income tax liability, and the separation of taxes into different types of income (from securities, shares, and bank deposits, etc.) reduces the progressivity of the tax system.

Progressive taxation is a tax system in which tax increases with an increase in income. For instance, if a person pays 10% in income tax on Rs100,000 of their income then another person with a higher income, say Rs200,000,. will be paying higher than 10%.

“Overall, in 2017–2018, high net worth individuals in Pakistan enjoyed privileges totaling Rs368 billion,” it added.

Pakistan’s feudal elite owns nearly quarter of country’s farm area

Pakistan’s feudal elite, which constitute just 1.1% of the country’s population, owns 22% of its farm area, the UNDP report revealed.

“They have disproportionate access to political representation in the National and provincial assemblies, enabling them to safeguard the tax benefits and special concessions they are granted,” the report said.

These benefits include favoured tax treatment for agricultural income and land revenues, low irrigation water charges despite Pakistan’s water-stressed status, preferential access to bank credit, and subsidies for fertilizers and the provision of electricity for tube wells.

“Overall, in 2017–2018, Pakistan’s feudal class enjoyed privileges totaling Rs370 billion,” it added.

Corporate sector enjoys privileges over Rs724 billion

The corporate sector encompasses Pakistan’s growing number of business owners and shareholders. Businesspersons are often members of federal and provincial cabinets.

“Moreover, large associations and embassies protect the interests of multinational corporations that operate in the country,” the report said.

“Overall, the corporate sector benefits from a host of privileges, such as the recent reduction of corporate tax on profits, the withdrawal of the Super Tax (meant for the extremely wealthy), and industry-specific concessions such as lower sales tax rates on production and sales, exorbitant import duties, and more.”

Overall, in 2017–2018, Pakistan’s corporate sector enjoyed privileges totaling Rs724 billion.

How to improve equality: Social movement?

UNDP Assistant Secretary-General Kanni Wignaraja, in an interview to Al Jazeera, says she wishes that there were a strong intent to review things like the current tax and subsidy policies, to look at land and capital access.

Wignaraja said that it will almost need a ‘social movement’ to displace structures of power that are deep-rooted.  

In a country like Pakistan, where the military continues to hold power over many aspects of governance, she warned that it would take almost a social movement to displace structures of power that were so entrenched, Al Jazeera quoted her as saying.

“I’m very clear that we can provide the analytics, we can put the impartial story out there and then it is up to the country, both the state and the people to say: ‘Enough, here is how we need to take break up these strongly-held power groups and dynamics in this country.’”



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