Nudge Economy

Author: Dr Farid A Malik

I was inspired to write this article after reading my friend Dr. Kamal Monoo’s writing titled “A tale of two budgets”. According to Dr. Monnoo the economist while the Indian’s have adopted the approach of ‘Nudge’ we have not. Dr. Richard Thaler of Chicago Booth School of Business won the 2017 Nobel Prize in economics for presenting his ‘Nudge Theory’. It focuses on behavioural changes to supplement economic growth. His approach is of caring not daring. In his own words, “People should not always be regarded as irrational, unpatriotic, tax dodgers or biased. Actions are influenced by the very way the choices are presented to them”.

Indeed Pakistan needs behavioural changes. The tax culture does not exist. After independence in August 1947 only 1% of the population paid income tax, this percentage has not gone up. Over the years the signals have been confused. Queen Victoria is no longer responsible to run the state, the people of Pakistan have to do it. Jinnah refused to accept Lord Mountbatten as the first Governor General. In 1956 the country was declared a republic with Iskander Mirza as its President.

Unfortunately, the colonial, coercive state apparatus continues to operate in an autocratic mode even after over seven decades of freedom. People are neither served nor facilitated. Attempts at reforms have not produced the desired results. The tax collection apparatus is corrupt and inefficient.

A democratic state is built to serve the people while in return it is their tax revenue which is the life line of this apparatus. Except for the initial few years an elitist approach has been adopted. The Americans took up arms on the principle of ‘No Taxation without Representation’. In other words tax money had to be collected and then spent under the gaze of the people. Revolt took place when this demand was rejected. After gaining freedom from the colonial yoke new systems were built to serve the people. IRS (Internal Revenue Service) is an efficient system of collection and then dissemination of taxes. Almost everyone is required to file annual tax returns.

Pakistanis are one of the highest charity and the lowest tax paying nations of the world, why? Mainly because the state is a levy with no service or return. Just visit the public toilet in any government office for an answer. It becomes clearly evident that the masses are treated as ‘Mazloom Faryadi’ (Oppressed Pleader) even after 72 years of freedom from the Raj.

Indeed Pakistan needs behavioural changes. The tax culture does not exist. After independence in August 1947 only 1% of the population paid income tax, this percentage has not gone up

Coming from a family of taxpayers some experiences in the new land are relevant. Tax receipts are being attached with the article. My grandfather Khawaja Siraj Ahmed paid two hundred seven rupees and one anna only in the year 1944-45 as income tax. For the year 1946-47 he paid Twelve Rupees three anna as property tax. Despite the fact that my father Nazir Ahmed Malik actively participated in the the freedom movement, the family paid up to date taxes. For the tax year 1947-48 they migrated to Lahore from Ludhiana. As upright tax paying business man my father had to fight for his rights as a free citizen, when he became physically frail he opted for litigation but ever gave in. He considered it to part of the freedom struggle to fight for his rights as a taxpayer.

After my old man’s death in Sept 1991, I inherited about twenty court cases. One of them was a writ petition against the Excise and Taxation Directorate. It come up for hearing after 18 years by the time he had expired. Luckily his lawyer was still alive so I got briefed by him. It pertained to Property Tax of the family house in Shadman. The tax assessed by the department was twice as much as the house next door despite being smaller in the covered area. He requested the department for the basis of the assessment. It was the discretion of the department came the reply. I appeared in the High Court myself and requested the court to take away this colonial discretion which was accepted. Now the taxpayer is entitled to know the basis of assessment.

Over the years the situation in Pakistan has become more complex. My father’s generation who fought back have perished. The colonial apparatus has ceased to function. Common good is on no one’s agenda. Economy is in shambles, trapped in debt. People are still willing to help but are unwilling to be exploited by the fangs of tax authorities. Keeping the family traditions alive, we are now the fourth generation of taxpayers despite no return on the levy only trouble and heartaches. The system is definitely choked.

The ‘Mazloom Faryadi’ demand ‘Nudge Economy’ to put the house back to order. Tax must be collected and then used for common good not for building personal empires. In the recent downpour in Lahore, the famous Lakshmi Chowk was inundated with rain water. The reporter was there to ascertain public sentiments. Standing under the pillar of the Orange Line came the comment, ‘Drain not Train’ it sums it up all. Imposed political leadership have sought personal kickbacks to increase their personal wealth at the interests of the impoverished nation. Yes we need to build drains for rain water and choke the ones build to steal our resources. The march to freedom and individual rights must continue while we continue to pay our taxes as a national duty of free people.

The writer is Ex-Chairman Pakistan Science Foundation Email: fmaliks @hotmail.com

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