An Asset-backed, Asset-based Taxation policy - Answer to PTI's Economic Policy

[AsifAmeer]

Couple of months ago I was lashed out for questioning PTI's fiscal deficit. I was constantly asked if I have a solution to address it or to remain quiet. I am throwing this policy out there. Although I would love to see PTI pick it up, but any party can pick it up if they have the marbles.

An Asset-backed, Asset-based Taxation policy
By Asif Punjwani September 1, 2012
http://www.scribd.com/doc/110565516/Pakistan-s-Land-and-Tax-Reforms

No party can have a clear Economic Policy if they don’t 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.


Let’s not fight the human nature. Let’s 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 couldn’t 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.


1. Document every inch of land and who owns it in Pakistan.

2. 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 to buy that land for amount submitted by the owner.

3. Then implement a 0.5% yearly Property tax on the property value.

4. Owner failing to pay taxes over 3 years, wouldn’t 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 won’t jack the price too high to avoid higher taxes. There’s penalty of defaulting on taxes as the owner risks losing the entire property. Also profits from selling seized properties should be shared with the Government’s 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 you’ll 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.

 

[GreenMaple]

The author should quote at least one example where this policy was successfully implemented.


If it is such a revolutionary economics ideas, how come it did not register with Nobel Prize Committee.

 

[UKPakistani]

until every inch of property is registered logged and accounted for, this is really not possible,

secondly we do not therefore know what the 0.5% would produce, too much or too little esp if owners get to choose the "value" of what they own

It cannot be done overnight and Gov still has to function so something like this has to be phased in over maybe a decade or more

Then there is the mindset and the inevitable resistence, lack of cooperation, downright hostilty and an lack of will for change

suppose we do get there, All the land owned by Governemt, the Army and other State Assets, would the State be subject to tax itself

Revenue collection would (it seems) be a Federal issue, and so there are questions as to distribution of funds at grass roots level

Would that not be subject to political might and favour and manipulation? Esp at election time. If this happens, it also requires a shift in the power to control the funds politically,............

Just some instant thoughts upon reading what you wrote. No criticism,

you know I want the rich to pay far more not just on land but wealth in general,


Finally I read somewhere once that wealth should be limited, so that the richest in any state (not country) could not be more than 10 times richer than the poorest, if that happens the "State" steps in to either downgrade the richest or upgrade the poorest by confiscating or giving . When I read it it made sense ... :) I liked it lol

 

[Corrupt]

1. Document every inch of land and who owns it in Pakistan.

2. 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 to buy that land for amount submitted by the owner.

3. Then implement a 0.5% yearly Property tax on the property value.

4. Owner failing to pay taxes over 3 years, wouldn’t 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.

[MENTION=24375]AsifAmeer[/MENTION]
by every inch you mean agricultural land too .... and if is that so then why point 4 only contains restriction to transfer title .. I think it should also contain that owners should not be allowed to use their land for any purpose .. either for agriculture or anything else..

 

[Altaf Lutfi]

The author must be appreciated for something constructive which will trigger healthy debate and deeper insight. However I feel that his words constitute to deal with normal situation where system parameters are set and direction is to be decided. In Pakistan, the very steps of reformation are held at door step by those mighty elements who have built empires and state visibly looks weak in knees to by-pass them. Unless and until there isn't a surgical ruthless operation in the beginning to drain ill-gotten money from veins of these monsters, no golden words are to work. The system itself is manned by cronies and the corrupt officialdom. Most of quick bucks are siphoned off to offshore. In states like Pakistan text book policy will come after deciding the moral direction of it. And the morals dictate only one rule "no matter what, tell me how did you accumulate this all in short time ?" Having satisfactory answers, the money should be taxed fairly and having no details , all wealth in excess should be confiscated. Whatever we hear about "sensitivity" of capital, "friendly" environment to attract investment etc is the smoke screen for the offenders so they can keep exercising their might to add to their power.
In last 5 years, under US dictate, Pakistan has pushed itself down the hill and given the amount of foreign debt ratio with GDP, self-reliance and freedom sound meaningless for decades to come. Any government to come will be hardly keeping Pakistan functional with eternal IMF assistance at the best. We are in such a state that even without a serious policy Pakistan will keep functioning. What a beggar needs after all ? Free fall is not a personal art but depends on air push and direction. Our pressure and direction is fine tuned in Washington by an army of finance managers. What people demand from PTI is financial justice that requires a beginning with shockingly quick and hard strokes to bleed bad blood from economic veins and set examples first. A harsh, unforgiving start will not only satisfy people, break bone of conspirators but it will create fear of law as well and encourage ordinary people to feel their responsibility to pay their fair share for Pakistan. If PTI will go with ordinary tools, youth will not let it survive for too long. We need late Bhutto's style of change to make it in days and weeks in positive sense.

 

[Baazz]

Asif bhai, mujy economics ki samaj bilkul nahi pr kuch sawal hain..
1: Yeh sab kuch practically kitni jaldi implement ho sakta ha...in the meanwhile mulk ko chalanay ka liye revenue kahan sa laya jae..?
2: kia property tax aik khas fixed value sa above ki property pr nahi hona chaye ya hr property pr..meri khud ki property jo inherited ha..agar 0.5% annual tax dainay pr jae tu mujy lalay pr jain...
3: is sytem ki koi practical example mention karain please.
4: is system ko use kr kay pakistan ka estimated revenue collection kitna ho sakta ha..aur bhi sawal hain zahen main pr type krna mushkil hota ha meray liye...(bigsmile)

 

[ranaji]

The author should quote at least one example where this policy was successfully implemented.


If it is such a revolutionary economics ideas, how come it did not register with Nobel Prize Committee.

agla nobel prize dai dain gaay

 

[UKPakistani]

The author should quote at least one example where this policy was successfully implemented.
If it is such a revolutionary economics ideas, how come it did not register with Nobel Prize Committee.

It is not something that has been "implemented" somewhere else, but exists in all places where they have a long history of record keeping and "logging"

I live in the UK, and I can assure you there is not a sinlge millimetre of the UK which is not owned or registered or taxed or exempt. I imagine as the USA was conquered inch by inch it is now owned inch by inch and as such someone somewhere is responsible to either pay tax on it or exempt. To be honest there will be countries which are considered third world, under developed or lacking in some other way where it is not the norm for every inch to be logged registered or taxed in some way. Sadly Pakistan is the perfect example of that,,,,,,,,,,, time to change :)

PS @ all you mocking and talking nonsense about nobel stuff. You are pathetic and sad, appreciate a thought an idea and a vision that is shared by someone who cares about the fututre of a country he does not live in but obviously cares about

and what he is proposing is nothing that does not exist of work elsewhere so grow up or shut it

What exactly do YOU have to offer in the alternative. Probab less than nothing but lets hear it anyway

 

[AsifAmeer]

Nobel is for Pride-hungry wh0res like robert merton, myron scholes, krugman, stiglitz, obama and the EU.

This policy cant be THAT bad... could it?

The author should quote at least one example where this policy was successfully implemented.


If it is such a revolutionary economics ideas, how come it did not register with Nobel Prize Committee.

agla nobel prize dai dain gaay

 

[AsifAmeer]

Haan.. this is NOT a Ready-to-Serve Policy. Lekin which ready-to-go policy has ever been successful? Homework to zaroori hai na. Good thing is Pak Govt has NADRA db to start with.

Owner listing too much/too low will have consequences. Here is how I have addressed it

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 won’t jack the price too high to avoid higher taxes. There’s penalty of defaulting on taxes as the owner risks losing the entire property

About capping the wealth of the Rich, is same like capping prices. NEVER works and has unintended consequences. Lekin this would take care of the rich as the richer they get, the higher their taxes go.

until every inch of property is registered logged and accounted for, this is really not possible,

secondly we do not therefore know what the 0.5% would produce, too much or too little esp if owners get to choose the "value" of what they own

It cannot be done overnight and Gov still has to function so something like this has to be phased in over maybe a decade or more

Then there is the mindset and the inevitable resistence, lack of cooperation, downright hostilty and an lack of will for change

suppose we do get there, All the land owned by Governemt, the Army and other State Assets, would the State be subject to tax itself

Revenue collection would (it seems) be a Federal issue, and so there are questions as to distribution of funds at grass roots level

Would that not be subject to political might and favour and manipulation? Esp at election time. If this happens, it also requires a shift in the power to control the funds politically,............

Just some instant thoughts upon reading what you wrote. No criticism,

you know I want the rich to pay far more not just on land but wealth in general,


Finally I read somewhere once that wealth should be limited, so that the richest in any state (not country) could not be more than 10 times richer than the poorest, if that happens the "State" steps in to either downgrade the richest or upgrade the poorest by confiscating or giving . When I read it it made sense ... :) I liked it lol

 

[AsifAmeer]

every inch means every inch.. no holy cows. If the land is not claimed, Govt should claim it in 10 years and sell it off to the highest bidder.

@AsifAmeer
by every inch you mean agricultural land too .... and if is that so then why point 4 only contains restriction to transfer title .. I think it should also contain that owners should not be allowed to use their land for any purpose .. either for agriculture or anything else..

 

[ranaji]

Nobel is for Pride-hungry wholes like robert merton, myron scholes, krugman, stiglitz, obama and the EU.

This policy cant be THAT bad... could it?

:lol::lol::lol::lol::lol::lol:

 

[compy]

Being PTI supporter, i totally agree with your point, and it should be included in detailed Policy paper, but it is just a part of it, keep working on each topic in detail and share that with some official in PTI.

Everyone will share your work.

 

[AsifAmeer]

Some interesting choice of words there mate. I say let by gone be bygone! If you have made $100 billion even illegally, fine.. so be it.. Now pay up 0.5% of that $100 billion every year in federal asset tax. So the more a person claims to be their's, the better it would be for the Govt to tax them. And its a fairly simple policy. Whatever your equity, you get taxed on that 0.5%, be it a house, a factory or even stock/bond/shares/dividends/coupon payments.. taxable on a daily interval basis to avoid fradulant rollover transactions.

Recently I heard a greek say "We arent protesting Austerity but the lack of justice for those who got these overpriced Govt projects and moved the money out of the country."

Back in 2008, Karl Deninger placed a toilet commode outside the US congress with a sign "Deposit your collateral for FED backed funding" to protest against the Federal reserve buying junk from Investment banks.

Let alone protest, Pakistani newspapers do not even bother reporting it. I wrote up about the discrepency in State Bank of Pakistan's losses worth $2.48 billion, even created a thread here but that was lost due to the site crash. But no media person picked it up. Financial reporters even spoke to me about this matter. but none reported it. NONE. Not just that, SBP has stopped releasing the monthly liquidity statement since May. One of the DAWN reporter openly tweeted to me that SBP is concerned about being questioned on the matter. But no one reported.

Pakistan's fight isnt against America or the West. Its 1st against its own arrogance/ignorance, and after that, its against the Global Financiers like the Bank of International Settlements, WB, IMF, Douche and ADB.

The author must be appreciated for something constructive which will trigger healthy debate and deeper insight. However I feel that his words constitute to deal with normal situation where system parameters are set and direction is to be decided. In Pakistan, the very steps of reformation are held at door step by those mighty elements who have built empires and state visibly looks weak in knees to by-pass them. Unless and until there isn't a surgical ruthless operation in the beginning to drain ill-gotten money from veins of these monsters, no golden words are to work. The system itself is manned by cronies and the corrupt officialdom. Most of quick bucks are siphoned off to offshore. In states like Pakistan text book policy will come after deciding the moral direction of it. And the morals dictate only one rule "no matter what, tell me how did you accumulate this all in short time ?" Having satisfactory answers, the money should be taxed fairly and having no details , all wealth in excess should be confiscated. Whatever we hear about "sensitivity" of capital, "friendly" environment to attract investment etc is the smoke screen for the offenders so they can keep exercising their might to add to their power.
In last 5 years, under US dictate, Pakistan has pushed itself down the hill and given the amount of foreign debt ratio with GDP, self-reliance and freedom sound meaningless for decades to come. Any government to come will be hardly keeping Pakistan functional with eternal IMF assistance at the best. We are in such a state that even without a serious policy Pakistan will keep functioning. What a beggar needs after all ? Free fall is not a personal art but depends on air push and direction. Our pressure and direction is fine tuned in Washington by an army of finance managers. What people demand from PTI is financial justice that requires a beginning with shockingly quick and hard strokes to bleed bad blood from economic veins and set examples first. A harsh, unforgiving start will not only satisfy people, break bone of conspirators but it will create fear of law as well and encourage ordinary people to feel their responsibility to pay their fair share for Pakistan. If PTI will go with ordinary tools, youth will not let it survive for too long. We need late Bhutto's style of change to make it in days and weeks in positive sense.

 

[Omrkhan]

@Asif Ameer, can you explain the discrepancy. Mere samjh nahe aya.

 

[AsifAmeer]

I wanna share a secret with you. Economics is not a science or a field. Its pretty much common sense. And congrat yourself that you arent an economist. Now to your questions

1a. This isnt going to be very easy. Lekin its a very doable policy. I live in Texas and I pay over 2.8% of my house value to the CITY. Then when I spend anything in stores, I pay 8.25% in sales tax that goes to the STATE of Texas. Then when I earn money, I pay 25% of whatever I make to the Federal Govt. And United States is famous for low taxes in the developed world...!

1b. Pak Govt has to shrink down across the board by 50% (yes 50%!) to match its revenue. Looking at the Federal expenditure, its like Govt to pooray mulk ka kharcha utha rahi hai. Subsidies all over the place. To curb inflation, that has to be removed. From farm, fertilizer to power subsidies. Let me say something here. If anyone promises you a smooth ride out of the economic mess Pakistan finds itself in today, he is LYING to you. There will be hunger and food riots in Pakistan before stability ever appears.

2. Like I said in my article "Exclusions and exemptions are admission to intellectual failure" and invites corruption. Mein nahi keh raha k it should be 0.5%. Make it 0.1%. Lekin agar eak insaan eak Mitti k hut mein bhi rehta hai to he should contribute something to the well being of the nation. From an economic point of view, this will bring property prices down, really bring down inflation and close the fiscal deficit gap.

3. Practical example was mentioned in 1a.

4. No one knows the total value of the real estate in Pakistan. There is no official record of it. I have not come across any unofficial record either. Lekin if the policy is implemented correctly, I do not see a need of 0.5% at all. A 0.1% would be more than enough to fund the Govt & its programs.

Asif bhai, mujy economics ki samaj bilkul nahi pr kuch sawal hain..
1: Yeh sab kuch practically kitni jaldi implement ho sakta ha...in the meanwhile mulk ko chalanay ka liye revenue kahan sa laya jae..?
2: kia property tax aik khas fixed value sa above ki property pr nahi hona chaye ya hr property pr..meri khud ki property jo inherited ha..agar 0.5% annual tax dainay pr jae tu mujy lalay pr jain...
3: is sytem ki koi practical example mention karain please.
4: is system ko use kr kay pakistan ka estimated revenue collection kitna ho sakta ha..aur bhi sawal hain zahen main pr type krna mushkil hota ha meray liye...(bigsmile)

 

[AsifAmeer]

Na na.. let them mock.. You see they are mocking me... not the idea! Ideas are infectious. They dont even wannt touch them.

Trashing the Nobel.. l actually enjoy their trashing.. Whats the fun in life when there isnt any drama...! You need the DRAMA! lol..

It is not something that has been "implemented" somewhere else, but exists in all places where they have a long history of record keeping and "logging"

I live in the UK, and I can assure you there is not a sinlge millimetre of the UK which is not owned or registered or taxed or exempt. I imagine as the USA was conquered inch by inch it is now owned inch by inch and as such someone somewhere is responsible to either pay tax on it or exempt. To be honest there will be countries which are considered third world, under developed or lacking in some other way where it is not the norm for every inch to be logged registered or taxed in some way. Sadly Pakistan is the perfect example of that,,,,,,,,,,, time to change :)

PS @ all you mocking and talking nonsense about nobel stuff. You are pathetic and sad, appreciate a thought an idea and a vision that is shared by someone who cares about the fututre of a country he does not live in but obviously cares about

and what he is proposing is nothing that does not exist of work elsewhere so grow up or shut it

What exactly do YOU have to offer in the alternative. Probab less than nothing but lets hear it anyway

 

[UKPakistani]

Na na.. let them mock.. You see they are mocking me... not the idea! Ideas are infectious. They dont even wannt touch them.

Trashing the Nobel.. l actually enjoy their trashing.. Whats the fun in life when there isnt any drama...! You need the DRAMA! lol..

My personal point of view....... the more they criticise you, the more they must be listening to you reading you and thinking about it all

 

[AsifAmeer]

Omer, you talking about the SBP losses in the Forex market?

This may not be the easiest task because it involves M2 statements, Reserve Statements and the Liquidity Statement from the Central Bank. If you are familiar with with accounting, shouldnt be that hard to follow. I have simplified the issue in my link mentioned above.

@Asif Ameer, can you explain the discrepancy. Mere samjh nahe aya.

 

[Omrkhan]

http://tribune.com.pk/story/454598/...crambles-for-funds-before-next-imf-repayment/