Report says British aid should be conditional on Islamabad's ability to stem graft and boost tax revenues from the rich
By Nita Bhalla
NEW DELHI (AlertNet) - British aid for Pakistan should be conditional on Islamabad's ability to stem graft and boost tax collection, especially among its wealthy, in a country where less than 1 percent of the population pay their dues, a UK parliamentary committee has said.
Pakistan currently receives £276 million ($400 million) annually from Britain for development projects in governance, health and education. This is set to almost double next year, making the South Asian nation the largest recipient of British aid.
But a new report based on an inquiry by British parliamentarians has recommended that future planned aid increases be tied to action by Islamabad to increase the proportion of gross domestic product (GDP) it collects in tax revenues from its super rich, as well as a concerted effort to curb rampant corruption.
"There is a powerful case for maintaining the UK's bilateral aid to Pakistan. Britain enjoys a close relationship and has long established ties with Pakistan which has real poverty and serious security problems," Malcolm Bruce, chair of the House of Commons' International Development Select Committee, said on Thursday.
"But the Committee is concerned that not enough tax is raised in Pakistan to fully finance improvements in the quality of life for poor people. In particular, we cannot expect people in the UK to pay taxes to improve education and health in Pakistan if the Pakistani elite does not pay meaningful amounts of income tax."
International aid groups welcomed the report, saying the UK should encourage Islamabad to boost revenue collection, but emphasised that aid should not be made conditional.
In Pakistan, the sixth most populous country in the world, one in three people live on less than 50 cents a day. Twelve million children do not go to school, and one in 11 children die before their fifth birthday.
The country is also prone to natural disasters including floods and earthquakes. And insurgency remains a key challenge, often resulting in massive displacements of populations and major humanitarian needs.
REFORM WILL 'TAKE TIME'
The South Asian nation is also a lower middle-income country, where corruption is rife and few of the elite classes pay their taxes.
In 2011, Transparency International ranked Pakistan 134 out of 185 nations in perceived levels of corruption, with 185 being the most corrupt. Only 0.57 percent of the population - a mere 768,000 people - paid income tax last year, according to the Pakistan Federal Board of Revenue.
Speaking at the launch of the report, which examines the scale and efficacy of British aid to Pakistan, Bruce said Britain must encourage Pakistan to implement effective tax collection as part of wider reforms to boost inclusive economic and social development.
"How Pakistan chooses to reform is a matter for Pakistan, but it’s clear there must be substantial reform grounded in lasting institutional change sufficient to transform the country’s services and social indicators," he said.
Aid groups such as Oxfam and Christian Aid cautioned against aid being tied to certain conditions.
"Pakistani authorities should work much harder to ensure wealthier citizens and profitable companies pay their fair share of tax. The Pakistani government should also step up anti-corruption efforts," said Shaheen Chubhtai, Oxfam's humanitarian policy advisor.
"But tax reforms and anti-corruption initiatives will take time. In the meantime, we should not turn our backs on the people who suffer the most from such issues: the tens of millions of poor Pakistani men, women and children struggling to get adequate food, healthcare, and schooling."
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