$3,488 a Year

One of the hallmarks of a failed government – and one of the most common aspects of third world plutocracies – is the rather stunning manner in which the wealthiest citizens avoid paying income tax. Either it is cheaper to bribe the underpaid bureaucrat charged with collection, or escaping the tax man is all too easy. Ask any ordinary salaried Greek taxpayer, someone who has those taxes withheld by his or her corporate employer (assuming they even have a job), and they know they bear a burden that the wealthiest Greek magnates avoid like the bubonic plague. Greek billionaires routinely move assets out of their nation, beyond the reach of the taxman. And the Greek government is sinking into a sea red with unsustainable debt.

The story is repeated all over Asia, Africa, Latin America... and the tax avoidance disease got so bad in place like France that the country imposed a “lifestyle tax” to mirror what the tax authorities believe you should have to earn in order to sustain a particular standard of living. It’s not pretty, but shirking tax responsibility appears to be a way of life for the vast majority of “earning” citizens around the world. We live in the United States where the taxman has deep audit capabilities, and where even rich and well-known public figures, like Wesley Snipes, face years in prison having been convicted on tax evasion. This is not exactly the story for the rest of the planet.

And then there’s Pakistan, the sixth most populous nation on earth with over 170 million people. If you make over $3,488 a year, you are deemed to have enough income to owe income tax. But, according to the July 18^th New York Times, less than 2% of the entire country are actually taxpayers! There are loopholes so huge you can fly Boeing 787s through them. In a land renowned for its feudalistic “family” control of land and wealth – vast tracts of massive agricultural holdings worth millions of dollars or more – making money from agriculture is tax free! And try this little beauty: “Much of the tax avoidance, especially by the wealthy, is legal. Under a 1990s law that has become one of the main tools to legalize undocumented — or illegally obtained — money made in Pakistan, authorities here are not allowed to question money transferred from abroad. Businessmen and politicians channel billions of rupees through Dubai back to Pakistan, no questions asked.” The Times. So if you can get your money quickly out of the country by hook or crook, it is automatically laundered when that money is sent back in! I’ll take two Mercedes S550s and a Bentley to go, please.

The very government leaders who are held above everyone else to set an example are no different. “The country’s top opposition leader, Nawaz Sharif, reported that he paid no personal income tax for three years ending in 2007 in public documents he filed with Pakistan’s election commission.” He claimed he was in exile and put his holdings in the name of family members. Maybe you heard the one about the Easter Bunny! And you wonder why there is so much radicalism in Pakistan, why crumbling infrastructure and a nation founded on greed and corruption has lost the support of the ordinary citizens. If you had to pick an environment to fos ter the growth of angry militants, wouldn’t Pakistan be a perfect choice?

The U.S., reeling from a tsunami of anti-American sentiment at virtually every level in Pakistan, is formulating plans to fill that populist void with a substitute for a tax-impaired government: foreign aid. The July 18^th Los Angeles Times: “Secretary of State Hillary Clinton on Monday unveiled an armada of development projects -- hydroelectric dams, municipal water supply overhauls, hospital makeovers, even a new mango export initiative -- in hopes of chipping away at the perception many Pakistanis have of an arrogant U.S. oblivious to the power cuts and water shortages that plague their lives… How Pakistanis perceive the U.S., and the billions of dollars in aid that Washington has set aside for Pakistan, became a major focus of Clinton’s two-day trip to Islamabad, her second since becoming secretary of state. The message she and her team wanted to convey to Pakistanis was clear: The image of an American government that views Pakistan primarily through the prism of fighting terrorism is outdated and unjustified.” But can this assistance, a huge dollar aid commitment but just a drop in the bucket in a country of 170 million people, make an impact when the tax-avoiding Pakistani wealthy care more about themselves than their own country?

“‘This is a system of the elite, by the elite and for the elite,’ said Riyaz Hussain Naqvi, a retired government official who worked in tax collection for 38 years. ‘It is a skewed system in which the poor man subsidizes the rich man.’” The NY Times. Oh, they’re stepping up enforcement these days, but paying taxes is just not done. “Most economic activity takes place in the shadows. Merchants — the most vociferous opponents of a value-added tax, a tax the International Monetary Fund has pressed Pakistan to adopt largely because it would require documentation — make up a fifth of the economy, but carry 6 percent of its tax burden. Out of millions of shops in Pakistan, just 160,000 are now registered for a general sales tax, [Mr. Zafar ul-Majeed, a senior official in the Federal Board of Revenue] said… [adding] his collectors now use individual electric bills to track down rich evaders, on the assumption that high bills mean air-conditioning, which means wealth. They recently issued hundreds of warnings to rich houses in Islamabad. But going after politicians, he said, is tricky. ‘Not while they’re in power,’ he said, smiling.” The NY Times.

This double standard, systems that allow the working poor and middle class to subsidize the wealthy, clearly creates nations of scofflaws, countries where deep resentment and a “I’ve got nothing to lose” attitude allows dangerous militancy to thrive in the open sores of a society founded on injustice. Unless these most basic building blocks of social balance and responsibility are in place, trying to get the local population up in arms against militants who are viewed as saviors is simply not realistic.

I’m Peter Dekom, and it’s amazing how many Americans think other countries run just the way we do.