Land & Tax Reforms

By Asif Punjwani September 1, 2012

No party can have a clear Economic Policy if they dont have a crystal clear philosophical view of the role of State vs Individual rights. I am not being critical of PTI here. All I am saying is that there is more room for some honest talk with the Pakistani Nation. Consistency is key to stability. Exclusions and exceptions are admission to intellectual failure. Lets not fight the human nature. Lets admit we all work in self interest. If my child falls along with your child, I will save my child first. If I can cheat the system legally, I will. The line between HAQ (truth) and HAQEEQAT (reality) will always exist. If Prophets couldnt remove that line, our chances fall below zero. Lets exploit the nature of money to make the wheel of commerce move. Let us be accountable to each other. Here is one way the Land/Tax reform should be handled.
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Ask the public to submit claims to their land. Set a deadline, say 2 years. If the land is not claim till then, its put in a public escrow account for 3 years before a public auction Let its owner access the value of his land and submit it to the Government. If the land value seems too low, the Titlement Office should have the right(only if proposed value is less than 30% of market value) to buy that land for amount submitted by the owner. Implement a 0.1% yearly Property tax on the property value. Owner failing to pay taxes over 3 years, wouldnt be allowed a title transfer on property sale till the outstanding taxes are cleared. Once outstanding taxes equals property value, the property be seized and the balance be settled after a public auction.

The benefits of a policy like this is that is discourages idle capital. A rich man wont simply buy farm land for expected future gains and not use that land as there would be a cost associated to holding that asset. Ex-pat Pakistanis who own properties wont lock up their homes for decades because there would be a cost in holding those properties. These locked up assets are not producing an economic value. The satisfactory part of the policy is letting the owner estimate the value of his property. Value (Rs/sqft) falling below 30% from its surrounding property average should trigger an audit. The owner wont lowball the price in fear of a buyback from the Government and he wont jack the price too high to avoid higher taxes. Theres penalty of defaulting on taxes as the owner risks losing the entire property. Also profits from selling seized properties should be shared with the Governments Tax prosecution department employees and management. This would give them person incentives to go after the lands of Tax defaulters. Eliminate all other forms of Federal taxes. Income, Sales, GST and every fancy worded tax should be wiped clean. Sure you can have a municipality sales tax to fund schools, hospitals and public welfare. Look at it at a personal level. Those public roads that take you home, those schools that youll send your kids to, that common defense, a justice system, all require a steady stream of funding. If your enemies are going to pay for you, you my friend are going to pay dearly.

Maybe more than an Economic Policy, there should be a discussion in Pakistan about the Philosophy on which to base that economic policy on. Its never a great idea to treat the symptom and leave the root cause intact. But PTI has initiated a healthy debate and that should always be appreciated.

Asif Punjwani trades Equities, Bonds and derivatives in the International Capital Markets. He can be reached via Twitter @AsifAmeer_AP