Tuesday, July 20, 2010

Pakistan, taxes and insurgency

We have long discussed the relationship between taxes, accountability and governance. This New York Times story from Islamabad, while not breaking any new ground particularly, serves as a useful reminder of how badly developing countries suffer from tax collection problems.

Much of Pakistan’s capital city looks like a rich Los Angeles suburb. Shiny sport utility vehicles purr down gated driveways. Elegant multistory homes are tended by servants. Laundry is never hung out to dry.But behind the opulence lurks a troubling fact. Very few of these households pay income tax. That is mostly because the politicians who make the rules are also the country’s richest citizens
. . .
in Pakistan, the lack of a workable tax system feeds something more menacing: a festering inequality in Pakistani society, where the wealth of its most powerful members is never redistributed or put to use for public good. That is creating conditions that have helped spread an insurgency that is tormenting the country and complicating American policy in the region.

Read on here, and take a look at some of the broader issues here.


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