The document discusses inequality in Pakistan across multiple dimensions such as income, assets, access to services, education and gender. It notes that the richest 18 million people in Pakistan consume 1.5 times as much as the poorest 72 million. Inequality traps exist that prevent upward mobility, with only 9% of those born to the bottom income quintile making it to the top quintile as adults, while 52% of those born rich remain rich. Reducing inequality will require policy reforms like improving tax collection, increasing public services spending, enforcing minimum wage and undertaking land reforms. However, tackling inequality in all its forms will be an ongoing challenge.

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50 shades of inequality in Pakistan
ZOFEEN T. EBRAHIM | HUSSAIN ALI — UPDATED MAY 14, 2015 02:40PM
Everyone wants a "naya" Pakistan. Many dream it to be a Dubai-lookalike - a
perfect mix of east and west; others wish it to be more orderly like Singapore,
where littering, daubing graffiti, jaywalking, spitting, urinating anywhere but
in a toilet are offences and come with a penalty.
Ironically when it comes to the gnawing gap between the rich and poor, there is a
resigned indifference.
Few Pakistanis ever say they want a Pakistan where everyone should have access
to justice and adequate nutrition, clean drinking water, enough food for their
families, quality education and healthcare. A Pakistan where political participation
and power is shared between the rich and poor regardless of gender, class or
religion and most importantly where wealth is not concentrated in the hands of a
handful.
There’s been a lot of ink spilled on how, less on why.
And fewer still realise that while incredible human progress may have been made
across the globe as well in Pakistan, it is stymied by the scourge of rising
inequality.

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Lets take a long look at the various dimensions of
inequality and see if we can find a way out the gaping hole.
In Pakistan the 18 million richest people's total consumption is 1.5 times more than
the poorest 72 million people.
Inequality has many different dimensions - race, gender, geography and economy -
and they all work in conjunction to make it pervasive.

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Often the different manifestations of inequalities - of income, assets, public
services - remain unaddressed.
Inequality traps:
Upward mobility - rich remain rich
Source: Oxfam study: Multiple Inequalities and Policies to Mitigate

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Oxfam's study shows that 40 per cent of sons born to the bottom quintile father
remain in the bottom quintile; only 9 percent make it to the top quintile while 52
per cent sons born to rich remain rich.
Education in Pakistan
Source: Oxfam study: Multiple Inequalities and Policies to Mitigate Inequality Traps
in Pakistan (March 2015)

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The number of out-of-school children in Pakistan is the 2nd highest in the world.
According to Alif Ailaan there are 25 million boys and girls between the ages of 5
and 16, who are out of school.
Gender inequalities
Pakistan ranks last in women participation in the work force among the South
Asian Association for Regional Cooperation (SAARC) countries - Oxfam study:
Multiple Inequalities and Policies to Mitigate Inequality Traps in Pakistan (March
2015) “Women comprise 42pc of the total family labour.”
Unfortunately this major contribution goes largely unacknowledged and
unrewarded - Women Agriculture and Rural Development: A Synthesis report of
the Near East Region, FAO, Rome.
Their output has never been accounted for or incorporated in national statistics. In
return for their contributions they are fed and provided with clothes etc.
According to government figures, the female labour participation rate is 18 per
cent, compared to 71 per cent for men.
However, according to Human Development in South Asia 2010/2011: Food
Security in South Asia by the Mahbub ul Haq Human Development Centre, the
share of the female labour force in the total agricultural labour force in Pakistan
since 1980 has increased to 30 per cent.
Agriculture may have the highest number of women working in the sector but 80
per cent of these women are regarded as unpaid family workers.
What's even more unfortunate, women own less than 3 per cent of the land and
those who do have little control over it despite being such a strident force.

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But these manifestations can be problematic as they take on a whole new hue when
looked at from the urban and rural lens or between provinces.
Even within a province inequality can be glaring. For example, Punjab may be
among the most developed province but persistent disparity abounds in southern
Punjab (e.g. Ranjanpur) compared to northern (Lahore, Gujranwala) and central
districts (Sargodha, Hafizabad). Between provinces, Sindh is the most deprived.
So how is inequality measured?
Mustafa Talpur, senior manager Policy Advocacy & Communications at Oxfam
International, explains: "While we see it all around us, it is elusive when it comes
to measuring it."
According to him there is no independent research organization to collect and
analyse the data on household income; the only source is the household survey
carried out by the Pakistan Bureau of Statistics but it has its limitations. Carrying
surveys on income inequalities are difficult.
"They are often suspect (the rich often do not want to tell their incomes),
incomplete (since these depend on smaller sample sizes) and often replete with
inaccuracies. That's when consumption (in economics it is the use of goods and
services by households) estimates come in handy.
The research carried out by LUMS for the recent Oxfam study, said Talpur, ended
up relying on non-income means to measure the level of inequality in the society.

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"For example tax evasion; structure of taxes; rising prices of essential items and
how these affect the poor; comparing assets and road density of different
geographical locations," he said.
What does extreme inequality do to society?
Extreme inequality pervading in societies hurts all of us and makes getting out of
the quagmire of poverty all the more difficult. Social scientists say inequality:
IMF economists in an essay in The Occupy Handbook, which analyzes the
grassroots Occupy Movement, blame the yawning inequality for "destructive, self-
perpetrating spiral of social polarisation, growing divisions" that resulted in the
crisis.
Can the pendulum swing?
While Dr Kaiser Bengali expresses that: "Abolition of inequality can never be a
rational objective, as different people and regions have different endowments", still
inequality is not written in stone; it can be minimised.
But for that some policy choices have to be made. A concerted effort has to be
made to come up with a fairer economic regime and political system that looks at
everyone equally.
We also asked a few people if they were asked to put things right how would they
go about it:

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"Implement land reform; enforce wealth and income tax collection; decrease
indirect taxation; enforce minimum wage; create microcredit opportunities; free
quality schooling till Matriculation; create vocational skills centres," is how Dr
Pervez Hoodbhoy would tackle inequality.
"Raise direct tax base, reduce indirect taxes, abolish absentee farming, and raise
public expenditure on low income housing and utilities (water supply, sanitation),
public transport, education and health," said Dr Kaiser Bengali.
There may be no simple formula to reduce or end the poor-rich gap. However,
certain steps can be taken to address the issue:
• Household surveys - quality surveys should be carried out so that policy decisions
are accurate and relevant.
• Inflation - increases poverty and inequality
• Taxation - structural weaknesses (narrow tax base, massive tax evasion and
administrative weaknesses) in the tax system.
Level the playing field
According to Islamabad-based think tank, the Sustainable Development Policy
Institute's deputy executive director, Dr Vaqar Ahmed, the government can reduce
inequality.

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Has the present government tackled the hydra of inequality by coming up
with pro-poor policies and to reduce the rich-poor gap?
SDPI's Ahmed, doesn't think so, at least not enough: "Prices came down due to
reduced global oil and commodities prices. So a good sign for the poor and will
reduce income inequalities. However, consumption inequalities and horizontal
inequalities (e.g. gender gaps) persist.
As for the schemes for the youth including small business loans; micro-interest
free Qarz-e-Hasana; youth training and skill development; free assistance and the
famous 'laptops' distribution scheme; he termed them a "disaster" and "poorly
planned and executed".
Similarly, in Punjab, the PML(N) has been subsidising essential food commodities
for the poor e.g. the Sasti roti and the Yellow cabs schemes, etc., but till a detailed
evaluation of such programmes is conducted, Ahmed is not sure how it may have
benefited the poor.
Further, said Ahmed, the pressure on the present government to reduce the public
sector development programme to meet the fiscal deficit conditions of IMF must
be resisted. "This can be done through increasing own tax resources and investing
them efficiently for development purposes," he said.

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Check rising inequality through tax reforms
• In Pakistan, in 2013-14, nearly Rs
500,000,000,000 were lost due to tax
exemptions. This is more than 1.5 times
the total education budget of Pakistan
(Oxfam report March 2015).
• At the global level, Oxfam has
calculated that a tax of just 1.5 per cent
on the wealth of the world’s billionaires,
if implemented directly after the
financial crisis, could have saved 23
million lives in the poorest 49 countries
by providing them with money to invest
in healthcare.
Naming and Shaming does work
Out of 1,169 parliamentarians, only 1,040 have filed tax returns for the Fiscal Year
(FY) 2013-2014 according to the Parliamentarians Tax Directory (PTD) by the
Federal Board of Revenue (FBR).
While the lawmaker's contribution to government exchequer remains a paltry Rs
239 million, an average of Rs 5,94,763 for each of the 401 members of the
National Assembly and Senate, it nevertheless showed that these parliamentarians
paid nearly double the amount in taxes in 2014 as compared to last year.

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Five prominent parliamentarians missing from the PTD
• Murad Saeed
• Ghulam Rabbani Khar
• Makhdoom Amin Fahim
• Arif Alvi
• Sharmila Farooqui
In 2011, according to a report by The Center for Investigative Reporting in
Pakistan (CIRP), only a third of the country's 446 federal lawmakers bothered to
file income tax returns that year.
Umar Cheema, working in The News who founded the CIRP to improve
journalistic standards in Pakistan, says tax compliance in Pakistan is pathetically
low and what's even more unfortunate is that the average Pakistani does not even
know or care about it and clearly reflects on the people they elect.
For that he holds his fraternity accountable whose job is the educate and inform the
public. "Under every stone is a story on how people find ways, mind you through
legal loopholes, to wiggle out of paying taxes. Yet journalists fail to investigate or
write about these tax cheaters," he said, adding: "It doesn't require any rocket
science to see the lifestyle they maintain and the paltry sum they pay as tax, just
see the parliamentarians tax directory published by the FBR, for the year ended 30
June 2014. It's just a matter of connecting the dots."
The Oxfam report proposes that through the new tax reforms consumption taxes
should be made less regressive "by having different levels of taxes on different
goods" and essential foods like grains etc., consumed by the lower income groups

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should be made tax free. Further it suggests making the FBR independent and
insulated from political influences.
If it has adequate financial and technical resources to enhance their data collection
and assessment capacity, it can preempt the tax evaders.
Why potential tax payers cannot be brought under the tax net?
In Pakistan only those people are caught in the tax net who don’t have a choice.
These are the salaried tax payers, business individuals who suffer tax withholding
at source or individuals who have un-earned income in the shape of profits from
bank accounts, dividends, capital gains etc.)
Breaking the cycle
Income, education and educational choice are linked together, reinforcing one
another and unless there is intervention through provision of education (if the
government focuses on quality of education, and in particular girls education, and
taking it to scale) since research suggests there are higher returns on this, the cycle
of inequality will continue.
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