Stop extra aid to Pakistan unless tax reform: Britain

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Britain should not increase aid to nuclear-armed Pakistan unless Islamabad tries to make its wealthy elite pay more taxes, British lawmakers recommended Thursday.

Britain is due to double its assistance to Pakistan to £446 million ($675 million) in 2014-2015, making it the biggest recipient of British aid.

But parliament’s International Development Committee said it was unfair for Britain to fund health and education projects unless Pakistan’s new government, due to be elected in May, tackles “rife” corruption and tax evasion.

“We cannot expect the people in the UK to pay taxes to improve education and health in Pakistan if the Pakistan elite is not paying income tax,” the committee said in a report.

“Pakistan’s rich do not pay taxes and exhibit little interest in improving conditions and opportunities for Pakistan’s poor.”

Citing figures from the Pakistan Board of Revenue, the committee said only 0.57 percent of Pakistanis paid income tax last year - and that no one has been prosecuted for income tax fraud for at least 25 years.

Less than 30 percent of Pakistan’s members of parliament pay tax, it added.

The committee said there was a “powerful case” for continuing aid to Pakistan, a country with “real poverty and serious security problems” as well as strong links to its former colonial power.

However, it added that past donations have often failed to reach poor Pakistanis because of corruption.

Asked about the report, a spokesman for the Pakistani foreign ministry said it was ‘a matter of common knowledge” that “all political circles and non-circles have been emphasizing the need to broaden the tax base.”

But Aizaz Ahmad Chaudhry also told reporters the Pakistani government “would like to focus more on trade and less on aid.”

Britain’s international development ministry said aid to Pakistan was “predicated on a commitment to economic and tax reform.”

“We have made it clear to government and opposition politicians in Pakistan that it is not sustainable for British taxpayers to fund development spend if Pakistan is not building up its own stable tax take,” a spokesman said.

“Following the election we will make available practical assistance to the incoming government to help deliver reform of the Pakistan tax system and work with the IMF, but tax and economic reform must take place.”