Call to link Pakistan aid to tax
Published 04/04/2013 | 00:26
Britain must only go ahead with a major increase in aid to Pakistan if the nation boosts the amount of tax it collects from its own elite, a Commons committee has recommended.
Pakistan will become the largest recipient of UK aid next year, a controversial move given the backdrop of corruption, tax avoidance and political instability, MPs warned.
Although there is a "powerful case" for continuing aid to the nation, British taxpayers must not be left to foot the growing bill unless Pakistan's wealthy are made to pay their fair share, the Commons International Development Select Committee said.
"Any increase in the UK's official development assistance to Pakistan must be conditional on Pakistan increasing its tax collection and widening the tax base," its report states. "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.
"We cannot advocate that the British people finance, through taxation, the proposed substantial increase in development assistance to Pakistan unless there is clear evidence that the newly elected Pakistan government is also willing to make the necessary changes so as to contribute more to improving the livelihood of its people.
"In the past, donor money has not been spent effectively in Pakistan for a variety of reasons. Corruption is rife in a social order based on patronage and kinship networks. Pakistan's rich do not pay taxes and exhibit little interest in improving conditions and opportunities for Pakistan's poor."
The Government plans to increase its £267 million bilateral aid programme in Pakistan, which has one of the smallest tax bases in the world, for the financial year that ends today to £446 million in 2014/15.
During their inquiry, MPs were told that while one in three people in Pakistan live on less than 30p a day, around 70% of the nation's MPs do not file a tax return. The committee indicated it wants Prime Minister David Cameron to push for action on corruption and tax evasion with Pakistan's leadership and called for the Government to use its influence within the International Monetary Fund to press for urgent reform of the tax system.
It criticised the Department for International Development (DFID) for failing to put action to tackle corruption, frequent absences in the rule of law and low tax collection at the top of the agenda for its governance work in Pakistan.
The committee also said it was sceptical of the "scaling-up" of DFID's maternal and new-born health programme, which is aimed at cutting the number of deaths among babies and new mothers by training community midwives, after it was given a "very poor review" by international assessors. It also found that while the Government believes educational programmes would help counter extremism, the connection was "unclear".