Property Taxes and State Incapacity in Pakistan

Description

Winner of the 2022 Bloomsbury Pakistan Book Prize

Property taxes are considered progressive and a good way of directly taxing the rich to pay for social services for all at the local level. But they tend to be under-used globally, especially in developing countries. This book offers some explanations on why property tax collection is exceptionally low in the Punjab. In doing so, it delves into the politics of decentralization and yet another failed attempt to establish viable local governments during the era of President Musharraf.Based on original research and the author’s long experience in the civil service, the book brings out the motivations of politicians and bureaucrats at the various levels of government, the interplay and frictions within the various tiers of the tax department, as well as the interaction between the tax collectors and the taxpayers. It finds that dysfunction at multiple levels exists for good reasons and perhaps even by design. The book is insightful on issues of tax policy and administration; intergovernmental fiscal relationships; perverse incentives for subnational governments to raid the fiscal commons than raise own tax revenues; weak institutional capacities; non-existent fiscal contract between the state and citizens and the missing loop of political accountability; working of street-level bureaucrats, etc. Any reform initiative, be it of a certain tax, an institution, or of the wider governance structure, cannot move forward meaningfully without understanding the underlying reasons of why things are the way they are, in the first place.

Reviews

“This book helps deepen our understanding of state-citizen engagement in Pakistan’s particularly difficult context, especially around its struggles with establishing stable local governments—a level of government that is essential to many of its citizens’ most demanded services—and establishing a progressive tax regime. It ably brings together these two essential facets of governance, and in the great tradition of ethnographies of the state, takes us deep into a barely understood but absolutely central part of the state apparatus in Pakistan.”

– SHANDANA KHAN MOHMAND,
Governance Cluster Leader and Research Fellow, Institute of Development Studies,
University of Sussex, UK

“This book examines the reasons for low local taxes in Pakistan, but it is unbelievably multifaceted. It provides a rich description of the institutional architecture of Pakistan’s federal fiscal system, analyses the perverse incentives it creates for local tax effort, presents rich primary evidence on the incentives created by the formal and informal arrangements that govern property taxation, and addresses issues of public policy. The contribution is a richly illustrated study of how the real tax system works, the values and work styles of the property tax collectors and the role political economy, informality and constant negotiation between collectors and property holders play in creating an equilibrium that ensures low collection. The book is a must read for reformers and academics.”

– ALI CHEEMA,
Associate Professor of Economics, LUMS

Author Biography

Dr Muhammad Mujtaba Piracha is Pakistan’s Ambassador to the World Trade Organisation in Geneva since 2019, where he is currently the Chair of the Committee on Trade and Development. He is a graduate of the London School of Economics and Political Science and undertook his doctoral studies at the Institute of Development Studies at Sussex. Dr Piracha has worked across Pakistan in both the government and non-government sectors. Some of his previous assignments include Additional Chief Secretary (Services), Commissioner Lahore, Secretary Industries, Commerce, Investment and Skills Development in Punjab; Program Economist at the Aga Khan Rural Support Program; and multiple field assignments in Balochistan.