Taxation and Good Governance and the Influence of Non-Tax Revenues on a Polity
Lack of sufficient taxation resources results in stunted growth of representative and democratic institutions and, non-tax revenue, specifically foreign aid, contribute to stability and longevity of specific regimes.
Farhan Zainulabideen and Zafar Iqbal
Policy Perspectives , Volume6 , Number2, July – December 2009
Abstract
[This paper is written in two parts. The first surveys literature on two distinct subjects: (a) the connection between taxation and representation followed by good governance, and (b) the characteristic of non-tax revenue upon a country’s polity. While certain conclusions are drawn from this survey, these conclusions are checked for their relevance and applicability in the Pakistani context. It will be seen that both conclusions-(a) a lack of sufficient taxation resources will result in stunted growth of representative and democratic institutions and norms in a country, and (b) non-tax revenue, specifically foreign aid, has invariably contributed to the stability and longevity of specific regimes in power-are applicable in the Pakistani political economic milieu. Authors]
The Impact of Taxation on Good Governance
There is substantial research literature now about the connection between taxation and governance. However, the issue is still at the margins of development policy debate.[1] Furthermore, the notion that sources of government income might significantly shape governance has only recently entered into development policy debates.[2]
In its raw form the argument was asserted by Margaret Levi:[3] “The history of state revenue production is the history of the evolution of the state.” In fact, taxation may play the central role in building and sustaining the power of states, and shaping their ties to society. This state building role of taxation can be seen in two areas: developing a social contract based on bargaining around tax, and the institution building compulsion provided by the revenue generation imperative. Progress in the former way fosters representation and democracy while progress in the latter strengthens state capacity.[4] This, however, is not to claim that taxation is an unambiguously and universally positive activity; much depends on the way in which states and the societies either achieve or fail to negotiate revenue generation.[5]
An analogy could be drawn by the following thought: Think first of a sluggish tax collector lumbering after a number of mobile citizens. Most of the times, he cannot catch them. But when he does, he treats them brutally and manages to extract some cash. At the end of the day, he trudges back wearily to show an angry king how little he has to show for his effort. Meanwhile, the citizens gather in the tavern, commiserating with those of their number who are bruised and battered, and lamenting how tomorrow their business and pleasure will be interrupted by the constant need to keep an eye out for the tax man. Then, someone has an idea: could they not reach an agreement with the king about how much they would pay, and what the king would do for them in return that would leave everyone better off? Conversation might turn to how they would select representatives to negotiate with the king. The greedy state threatens to tax citizens who would prefer to keep their wallets closed. However, the experience of being taxed engages citizens in the political process. Taxation becomes a source of healthy conflict between them and the state. Ultimately, the dependence of governments on tax revenue encourages bargaining with taxpayers and an exchange of voluntary compliance over tax payments for institutionalized influence over public policy.[6]
This core narrative brings out the motivations of both the parties in this bargain. The state is motivated by a search for (a) security against threat, (b) generating revenue, and (c) the desire to legitimize rule in order to reduce the cost of governance, while the taxpayers are motivated by a desire for (a) security of life and property, and (b) low and predictable taxes. The following are the main elements of this core narrative:
(1) The context of tax collection/revenue generation effort by the state is assumed to be external threats and interstate warfare, and the swallowing up by the victorious state of those polities that could not raise sufficient resources to compete militarily. The military is the dominant item in the state budget.
(2) Two sources of revenue were available to the state apart from bargaining with potential taxpayers: to own state property (prerogatives), or dependence on coercive taxation. Both alternatives possessed serious handicaps, especially in the state’s ability to quickly expand income in case of threats of war. States dependent on these two sources of income were ill placed to survive threats from states mastering better methods of raising taxation.
(3) That better method was contractual taxation arising out of revenue bargaining, which offered joint gains to both parties. First, since taxes were jointly agreed, taxpayers delivered relatively more willingly and the tax collection process became less onerous and costly, and more predictable. Second, with better knowledge of future obligations, taxpayers felt more secure in making economic investments, whereas the rulers could undertake longer term planning more effectively. Third, since revenues could be exchanged for public policies, it encouraged the search for policies that were mutually beneficial for the main parties. Fourth, taxpayers could now respond more positively to emergency calls for war finance, since they were already implicated in major public policy decisions.
(4) Revenue bargaining motivated the ruler to establish institutions where taxpayers could be represented, or to strengthen those representative institutions that did exist.
(5) The arrangement sketched out above initially gave rise to the “tax state.” In some cases, the tax state evolved into a superior form, the “fiscal state,” i.e., a state that was able to rescue an effective and consensual tax system on the basis of which it could engage in large-scale borrowing. This ability imparted an even greater capacity to the state to raise financial resources to cope with emergencies. The competitive military edge came from the ability to borrow quickly and cheaply on the strength of the government’s capacity to repay through future tax revenues.[7]
In addition, the greater dependence of the state on representative negotiation for raising taxation should have three broad positive consequences for nation building:
(1) Rulers dependent on taxes have a direct stake in the prosperity of their citizens;
(2) This dependence also promotes a modern bureaucratic state by encouraging the creation of reliable records and obliging the state to invest in a reliable, uncorrupt, professional public service to assess and collect dues; and
(3) Tax collection leads to compilation of a great deal of information, which can in turn contribute to better policy making.[8]
At this point, it needs to be borne in mind that ‘state capacity’ primarily refers to a state with an effective bureaucracy. The point of departure is Weber’s notion of the modern, rational-legal bureaucracy, structured along impersonal, technocratic, hierarchical lines. Its written records provide a strong institutional memory and its personnel have formal salaries, rely on standard operating procedures and knowledge based rules, and answer to superiors who should take decisions according to impersonal, technocratic criteria.[9]
Thus, representative government arose in part because it was useful to rulers: it reduced transaction costs, enabled the system to appear more ‘fair,’ and strengthened the link between the payment of taxes and receiving of services. All of these enabled rulers to raise more revenue. Likewise, technical and organizational developments over time made it possible for rulers to adopt policies inconceivable in the past, construct more sophisticated institutions, foster lower costs, expand surveillance and services, and thereby strengthening the state.[10]
Other scholars have looked into how institutional differences within democratic systems affect revenue generation capacity. Boix found that parliamentary systems were able to raise more revenues than presidential systems.[11] Gerring, Thacker and Moreno found that countries with constitutions that encouraged ‘voice’ instead of ‘veto,’ i.e., unitary political systems rather than federal, parliamentary rather than presidential, and proportional representative rather than first-past-the-post, could collect higher levels of taxes.[12] Steinmo and Tolbert found that the taxation level in Organization of Economic Cooperation and Development (OECD) countries was affected by the distribution of power amongst parties: countries in which the largest party held just under a majority of the seats had more incentives to compromise than those that had one large majoritarian party or many small parties, and were able to raise higher tax revenues.[13]
In early modern Europe, monarchs seeking new sources of revenue to fight wars increased taxes on trade, on property, and on ordinary citizens. Yet, only the taxes on trade (custom duties), goods (excise duties) and fixed property could be increased significantly, and these increases were subject to consent, which had to be negotiated. Assemblies of notables were formed to negotiate this consent. A primary aim of representation was to bargain over taxing and spending. Taxpayers who believed that their interests were represented in a democracy might have been more willing to pay taxes, but they also believed that their payment of taxes gave them the right to representation. Representation, however, was only part of the fiscal contract; it could also include public goods and services and involved pressure on governments to be more accountable to taxpayers for the efficient use of their money.[14]
The familiar argument about the origin of representative government being intimately bound with the evolution of taxation has been presented above. The oft-told narrative began with war: the cost of warfare led European monarchs to increase direct taxation. This prompted the rise of parliaments, and it led to larger, more capable and more professional state bureaucracies. However, there exists a less familiar argument about taxation and state capacity too. It proceeds thus: revenue demands fostered tax reformation, shifting from tax farming to permanent, modern bureaucracies. Since these bureaucracies needed a literate and numerate workforce, it stimulated the rise of formal education systems. Furthermore, the bargaining between taxpayers and the monarchs encouraged rule of law protecting private property rights. As seen above, rulers were able to raise bonds on private capital markets backed by taxation. Formed originally to finance wars, these institutions became essential supporters for European economic development.[15]
Conversely, many governments do not face the compulsion to raise revenue through a bargaining, representative process. The long-term consequences for quality of governance in such a situation-where governments either levy taxes coercively, or are endorsed with large non-tax incomes, for instance from oil, gas and mineral export or from foreign aid-are malignant: states are less responsive and accountable to citizens and may have fewer incentives to develop the political and organizational capacities of the state. They are likely to be simultaneously arbitrary and weak. Establishing more consensual taxation practices is an important practical route to improving governance.[16] Broad taxation, natural resource surplus exports and development aid are the dominant income sources for contemporary states.[17]
The core proposition in the definition and measurement of good governance is that political regimes are the outcome of tension and conflict between (a) elites who control the state and wish to remain in power, and (b) societal actors who want to place restraints on the power of a potentially despotic state, either to protect themselves or to acquire power for themselves. Revenue is central to this conflict, since it is the source of power and provides the incentive for state elites to bargain and negotiate with taxpayers.[18]
In a slight variation of the bargaining model presented above, Michael Herb has outlined what he calls a legitimation model, in which the rulers’ need for money to fight wars is still central, but representation is not as much a direct reward for revenue as it is an effort to legitimize taxation. This argument has several parts: (a) the choice to pay taxes comes not only from fear of punishment, but also from a sense of duty and obligation, (b) representation helps create and maintain a sense of duty, thereby enhancing revenues, (c) states with representation fare better in international affairs, and (d) recognizing this, state leaders choose to provide representation.[19]
The Tax v. Non-Tax Distinction in the Governance Perspective
If a government’s reliance on taxation is one sector in the state’s tilt towards representation and better governance, how does non-tax revenue impact a state?
As we saw earlier, the two highest incidence forms of non-tax revenues are oil, mineral resources, and foreign aid.
There is a large volume of literature on the rentier state,[20] which points to the characteristic weaknesses and the lack of accountability of states that depend heavily on revenues from natural resources. The argument proceeds thus: reliance on natural resources and other kinds of rents leads to a truncated process of institution-building. With easy access to reliable revenues through taxing foreign corporations, resource-based states don’t need to organize their societies to raise revenues. They don’t need to bargain with or establish fiscal accountability towards taxpayers. They don’t need to build autonomous, capable bureaucracies to generate and utilize resources efficiently.[21]
Similarly, studies on countries that are highly dependent on foreign aid over long periods clearly evidence that they face difficulties in developing extractive capacity. For instance, Bräutigam and Knack found that large levels of aid reduce government revenue generation. Research conducted at the World Bank found that aid to African countries reduced tax revenues by an average of 10 percent. Studies emphasize two concepts of aid dependence: (a) aid creates more financial autonomy as governments’ prolonged reliance on “unearned” income requires little bargaining with taxpayers, or construction of taxable capacity in society, and (b) the aid system, with multiple uncoordinated donors and their independent project management units, can promote institutional destruction in what are already weak states.[22]
In countries rich in natural resources, state building focuses on the mechanisms of distribution of earnings amongst shareholders. Foreign aid or “strategic rents” may provide the same kinds of incentives and disincentives. In contrast, states that rely on taxation for their revenues face stronger incentives to ‘feed the goat’ that must be milked.[23]
Relative to the historical experience of the OECD countries, the governments of many contemporary developing countries are more independent of their domestic taxpayers for revenue. Rents from natural resource wealth and strategic rents (mainly foreign aid) are on average more available to governments today. The theory suggests that there is a causal connection from this dependence on rents, rather than taxes, to the fact that public authority in much of the South is often relatively illegitimate, ineffective and unaccountable (bad governance).
More simply, the proposition is that the dependence of governments on broad taxation for revenues is good for the quality of governance.[24] In Mahon’s words: “We have good support for the idea that the proportion of direct and domestic indirect taxes in state revenues, as opposed to rents from oil, minerals or other sources, is a fair predictor of democracy and an even better predictor of liberalism.”[25]
In general, the governments of many contemporary developing countries have access to very large non-tax revenues. These free them from dependence on local taxpayers and obviate the need for revenue bargaining with the general potential taxpayer.[26] Moore confirms here:
Are we right to be concerned about the impact on the quality of governance of the dependence of so many contemporary governments on rents – from natural resources or development aid – rather than on broad taxation? Were these rents not available, would we find more widely replicated in contemporary poor countries the beneficial consequences of revenue bargaining for the quality of governance that so many people have identified for historical Europe? A combination of historical and contemporary case material, deductive logic and contemporary cross-national and intra-national statistical analysis suggests a positive answer to both questions and supports the contractualist notion that polities are significantly shaped by bargaining between states and societal groups around fiscal issues.[27]
All the wealthy, democratic states of OECD have been almost exclusively funded from broad taxation for many decades, especially recently.[28]
As far as foreign aid is concerned, it has been an exceptional mode of financing states for most of history. It is mostly associated with creating direct influence of the donor over the recipient state. The large expansion of foreign aid was motivated in part by geo-strategic concerns around the cold war. While aid has concentrated on poorer countries, it now constitutes a major income source for many governments.[29]
There are, however, alternative theories in the implication of not having to tax. Some deal with the extent to which governments with large incomes from natural resources can buy off opposition and perpetuate themselves in power. This motivates higher expenditure on military, police, and intelligence services, the general militarization of politics, and exclusionary governance. These different causal sequences are consistent with one another, and might all be operating simultaneously.[30]
Sandbakken narrows down the rentier state framework to three specific features that make them unlikely to consolidate as democracies: first, rentier states do not rely on taxation for income and thus are released from democratic obligations to their taxpayers; second, the state spends oil revenues on placating and repressing its population; and third, the social structure in rentier states leaves very little room for democratic opposition.[31] Scholars argue that a regime will stay in place long after oil prices have begun to decline because of the institutions built by the regime during high revenue periods. They also hold that declining oil prices will not necessarily mean transition to democracy but will lead instead to political instability.[32]
The argument that there cannot be representation without taxation is the conventional conclusion of this large volume of literature on rentier states. This is true about half of the countries in the Middle East, along with many countries in sub-Saharan Africa and elsewhere.[33]
In 1995-2000, average tax revenues as a proportion of GDP, were 13 percent for low income countries, 19 percent for middle income countries and 36 percent for high income countries.[34]
An interesting implication of rent income is the discretionary power over how these revenues are spent. The regime can afford to buy off or repress political opposition. It can also purchase consent and acquire some form of legitimacy through welfare expenditure, such as education, health, social security, employment, infrastructure and private sector investment. Elites are likely to find rent-seeking a superior alternative to alliance-building. This reduces the pressure to democratize. An autocratic regime can also create loyalty through patron-client networks that increase political stability and ensure a measure of legitimacy, at least in certain influential quarters. These networks involve personal favors in the form of jobs, licenses, contracts, projects, etc. A side-effect of high rents is therefore corruption. Widespread evidence of patronage and corruption in such countries, such as embezzlement, bribery and nepotism, would support this idea.[35]
The rentier state theory also explains the slightly different impact of oil revenues as compared to other forms of wealth on regime types. The oil rentier does not have an independent middle class that can be a source of viable opposition, because the merchant class and the traditional elites are replaced by a ‘rentier’ class. This class consists of civilian technocrats and military officers. The labor class in the oil rentier states is also unable to play the role of opposition, since a sufficiently large scale of industrial establishments is lacking.[36] On the other hand, since foreign aid largely comes from rich western governments that are ideologically democratic in their polity, and goes to countries without equivalent ideological commitment to democracy, there has been an increased willingness on the part of donors to restrict aid to countries that do not respect human rights.[37]
Criticism of the Standard Taxation/Representation Model
Michael Herb argues that the existing political science literature overlooks an important explanation for how taxation promotes representation. This explanation, which Herb suggests is more familiar to historians than to social scientists, is that taxation contributes most to the emergence, strength and longevity of representative institutions where these institutions-or their members-have a direct role in the administration of taxation. He argues further that the modern representative assemblies that sprung off the French Revolution do not collect taxes. As a consequence, they do not enjoy the bargaining power that their predecessors enjoyed from taxation.[38]
The direct involvement of assemblies in tax administration has a profound effect on the devolution of representative authority to these assemblies, in Herb’s argument. If rulers collect taxes and punish shirkers, as modern rulers do, then they have no need to trade representation for revenue, as they can simply exploit the taxpayers. The only real role left for assemblies is to extend legitimacy to the collection of taxes. In contrast, if the ruler does not directly collect taxes, then it might expect to extend some bargaining power to whoever does.
Herb distinguishes the actual collection of taxes from the mere consent to their collection in his argument. Thus, he claims that the emergence, strength and longevity of representative assemblies chiefly came about when and where these institutions had a role in actual collection of taxes. He argues that since representative assemblies do not have this role in the modern world, taxation has a much reduced role in the emergence, strength and longevity of modern representative institutions.
A critical component of Herb’s argument is the very distinct periodization in the evolution of representative assemblies as far as tax administration is concerned. Thus, whereas medieval and early modern assemblies usually played a role in collecting taxes, the reformed assemblies that emerged in Europe after the French Revolution eschewed a direct role in tax administration, leaving that either to the royal bureaucracy or the government executive branch.
To the present authors, this periodization of the evolution of representative assemblies is the crucial element that provides a rebuttal of Herb’s thesis. Clearly, the modern reincarnation of representative assemblies went through this evolution from a hands-on approach to revenue collection to a less adventurous role, but not before they had already acquired an indisputable ultimate authority over the tax administration organ of the state. This is most contrastingly obvious from the British example that Herb himself presents in his paper. The British parliament asserted and retained its supremacy over the monarchy despite the function of tax administration being vested in the “Majesty’s” government. This happened simply by the fact of the parliament securing control over royal ministers and thus over the Crown’s bureaucracy. Once the parliament achieved this, it didn’t need to preserve its autonomy from the Crown by insisting on collecting taxes directly.
The point of the present authors here is that once representative assemblies had evolved to a stage where they had almost indisputable overall authority over the absolutist forces, the question of actual tax collection, upon which Herb’s thesis rests, became redundant. The tax administration organs automatically fell under the assemblies’ explicit authority in their evolution after the French Revolution. Reformed assemblies tamed the despotic state by pushing the monarch aside and taking control of their tax bureaucracies, not by starving it of funds. Thus, in the opinion of the present authors, the original argument that Herb has tried to underplay, that taxation has had a central role in the evolution of representation and good governance, still stands.
A more relevant and interesting part of Herb’s argument appears towards the end of his well researched paper, where he suggests that while monarchs find it easier to share power with a representative assembly, typical modern authoritative rulers stand to lose their jobs if they try to hold truly fair parliamentary elections. It is therefore hardly clear why they should run this risk to increase state revenues.[39]
The Stabilizing Influence of Non-Tax Revenues
Non-tax revenues form about a quarter of government revenues around the world.
In his important dissenting paper, Kevin M. Morrison links all non-tax revenue with regime stability and hypothesizes that non-tax revenue should be associated with less taxation of elites in democracies, more social spending in dictatorships and more stability for both regime types.[40]
Morrison defies the conventional wisdom about the two non-tax revenue sources, oil and foreign aid. Both these sources imply opposite predictions about their effect on political regimes, being that oil generally has anti-democratic implications, while foreign aid has positive ones.
Morrison argues that oil revenues and foreign aid have similar effects. These revenues neither have “antidemocratic” properties, nor “pro-democratic” properties. Instead, they have stabilizing properties in that they reduce the chances of regime transition whether in democracies or in dictatorships. These revenues allow a regime, either democracy or dictatorship, to stay in power. Thus, non-tax revenues may lead to greater stability in the developing world as well as in the international sphere.
Morrison also provides a causal mechanism for the actual utilization of non-tax revenue from the perspective of achieving such stability. In his paper, he shows that dictatorial regimes are threatened most by citizens who are unhappy about the amount of transfers that they are receiving. Once citizens solve their collective action problem, they can mobilize against the elites, launching a revolution and achieving democracy. This causal relation is reversed in democracies, since they are threatened most by elites who are unhappy with the level of taxation and transfers demanded by the citizens. Therefore, in democracies, once the rich overcome their collective action problem, they can mobilize against the democratic regime and impose a dictatorship.
This line of argument leads to the policy prescription that in order for regime stabilizing influence of non-tax revenue to work, dictatorships should appease citizens by providing higher transfers and social services to the citizens; while on the other hand, democracies should lower the tax rates for elites to reduce their dissatisfaction with the democratic regime. In democracies, non-tax revenues should be associated with less taxation of rich elites. In dictatorships, non-tax revenues should be associated with increased spending on poorer citizens.
The stabilizing impact of foreign aid on dictatorial regimes would not be particularly concerning if global aid flowed to democracies. Unfortunately, this is not the case. In 2006, 64 percent of all foreign aid went to regimes not considered fully democratic. In that year, 67 percent of US aid went to such countries. In other words, the majority of the world’s overseas assistance goes to stabilize countries that are not fully democratic.[41]
The discussion so far leads us to two obvious conclusions:
(1) That taxation in part leads to representation and good governance, and
(2) Non-tax revenue not only does not lead to representation and good governance, but acts as a stabilizer for the existing political regime. This holds also for foreign aid received by the regime.
We carry these conclusions forward to Part II of our paper and observe historically how these trends have influenced the evolution of Pakistan.
The Fiscal Milieu of Pakistan in Relation to its Political Economy
The following discussion has a cursory look at the evolution that the country witnessed in the political arena, taxation as well as foreign assistance inflows over the past six decades of Pakistan’s existence and their linkages with representation and governance.
Political Evolution
Pakistan was created in 1947 to pursue and safeguard the interests of the Muslims of the subcontinent.[42] It has faced various crises since its creation. Of the range of factors responsible for this state of affairs, the most important is the failure to establish a democratic system of governance. For more than half of Pakistan’s 62-year existence, the military has dominated politics and national life, stifling the development of credible democratic institutions. Even during the interregnums that have punctuated direct military rule, when civilian governments have been in power, the military has cast a long shadow over politics and the national agenda.[43]
The story of Pakistan is one of a remorseless tug of war between the civilian and military rulers on the one hand and the liberal and religious forces on the other. The chief casualties have been rule of law, state institutions and the process of national integration, with great consequences for civil society.[44]
Pakistan’s failure to institutionalize democracy began with the 1948 war with India, which made the country feel vulnerable to the Indian threat. Between 1947 and 1950, approximately 70 percent of the Pakistani budget was spent on defense. As Liaquat Ali Khan, Pakistan’s first Prime Minster, put it, “the defense of the state is our foremost consideration…and has dominated all other governmental activities. We will not grudge any amount on the defense of our country.” This began the process of giving the military inordinate stature and influence in Pakistani society, while diverting money away from economic and social development. Its political effect was dramatic. Instead of democratic institutions and infrastructure being strengthened, unelected institutions, such as the army and the intelligence agencies, gained precedence and became the central institutions of the new country.[45]
For nine years after Pakistan’s creation, the Constituent Assembly was unable to agree on a constitution, due largely to strong disagreements over the different needs of East and West Pakistan.[46] But the new parliamentary system was soon in difficulty: in 1958, General Ayub Khan launched Pakistan’s first military coup. Martial law was declared, political parties abolished and a pattern of military control was established that has characterized almost half of Pakistan’s existence since independence. A new constitution, placing politics firmly under military guidance, was promulgated in 1962. But a failure to win a second war with India in 1965, mounting corruption and increasingly uncontainable frustrations in East Pakistan gradually undermined Ayub Khan’s authority, finally forcing his resignation in 1969. The first election on a nationally democratic basis was subsequently held in 1970.[47]
When East Pakistan’s Awami League Party won an absolute majority in the new national assembly, Pakistan’s new president, General Yahya Khan, denied its leader, Sheikh Mujib-ur- Rahman, the prime ministership and instead allowed a military crackdown in East Pakistan. In response, Sheikh Mujib declared Bangladesh an independent state. Because India had militarily supported the Bangladesh movement, war again broke out between India and Pakistan in December 1971. Within two weeks, the Pakistan army was defeated, and more than 90,000 Pakistani troops surrendered. East Pakistan became the independent state of Bangladesh, and Pakistan lost over half of its population.[48]
The country has a unique constitutional experience: it has witnessed frequent and drastic constitutional changes in the form of three permanent constitutions, several provisional constitutions (under military rulers), and a series of major amendments to the present (1973) constitution. All this has forced the system to oscillate between presidential and parliamentary forms of government. These recurrent and regular changes have also created political instability and unreliability in the relationship between democratic institutions and the powerful civil-military bureaucracy. In all of this, the judiciary played a significant role by maintaining the status quo and not obstructing the military adventurers. Nearly every dismissal of a civilian government and every military takeover has been upheld by the higher judiciary, invoking the controversial “doctrine of necessity” to undermine democratic traditions.[49]
With the independence of Bangladesh, what was now left of Pakistan was able to shake off the dominance of the old, still colonial, bureaucracy, and even forced the army back into the barracks. This was the time of Zulfiqar Ali Bhutto’s rule And it was full of contradictions. Bhutto aired a distinct anti-establishment rhetoric. Mobilization of the poor masses of Pakistan, for the first time in its history, became his trademark, along with socialist sounding speeches. But he was also a feudal landlord. When Balochi frustrations with the central government increased, Bhutto ordered a brutal military campaign to crush the insurgency. His political style also shifted very soon from democratic to repressive and authoritarian, weakening his social base considerably at the end of his rule. When the army finally overthrew him in 1977, there was little resistance.[50]
General Zia-ul-Haq was the first (and so far the only) Pakistani leader committed to a program of Islamization. The United States became his staunchest supporter since Pakistan was the channel for military aid to the Afghan mujahidin, then engaging the Soviet Union in Afghanistan.[51] The Zia years saw the acceleration of a nuclear program, growing Islamization in the armed forces and Pakistani society at large, and a decline in spending on health, education, and social services. Zia did allow non-party elections and lifted Martial Law in 1985; but he dismissed his own prime minister in 1988 when the latter showed some sign of independence on foreign policy issues. After Zia died in a still-unexplained plane crash in 1988, both the press and Pakistan’s political parties showed an impressive regenerative capacity, and Pakistan embarked on a ten-year experiment with democracy.[52]
During this democratic interregnum, Benazir Bhutto and Nawaz Sharif each served as prime minister for two terms, from 1988 to 1999. For the most part, freedom was protected, other parties were allowed to function normally, and it appeared that Pakistan had evolved into a two-party democracy. However, the army, conservative members of Pakistan’s powerful establishment, the intelligence services, and the former bureaucrat, President Ghulam Ishaq Khan, could not resist the temptation to interfere behind the scenes. Neither Bhutto nor Sharif served their full term-both were dismissed by the president (often with the connivance of the army), and the election process was manipulated by intelligence services.
On the other hand, Sharif interfered with the operations of Pakistan’s judiciary and both Bhutto and Sharif indulged in abuses of power and engaged in or tolerated a degree of corruption.[53] The governments of both Bhutto and Sharif lacked any ideology. They both tried to appear in modernist garb, but their performance was generally worse than their predecessors’. The struggle for power between the Mohajirs and Sindhis in the province of Sindh became one of the major destabilizing factors in Pakistan, arresting economic development in the country’s main commercial and industrial center, Karachi.[54]
During Nawaz Sharif’s second term, a new development occurred: the weakening of state structures from the Prime Minister’s attempts to bring them under his personal control. Sharif successfully forced the president to resign, drove the Chief Justice of the Supreme Court into resigning, and did the same with top ranking military brass. While the last move might be perceived as enforcing civilian authority over the armed forces, all three were politically motivated to weaken or abolish any potential counterweight inside the state structures to the Prime Minister.[55]
During the democratic interregnum, as in previous decades, the army remained the true power in Pakistan, coming to the forefront again in 1999 when Sharif’s army chief, General Pervez Musharraf, dismissed the civilian government and assumed power as “Chief Executive.” This regime left a country divided, economically bereft, and threatened by the emergence of extremist groups.[56]
Despite attaining independence through a constitution struggle, Pakistan has yet to establish a stable political system based on broadly accepted constitutional consensus. Selected patronage, financial dishonesty, and feudalism continue to devastate its political culture. In its hour of crisis, even the proponents of democracy look to the army for “advice and guidance.” This undesirable situation is further augmented by the bureaucracy’s emergence as a separate entity with its own aspirations and ends. Involving the intelligence agencies in national politics over the years has further weakened the already crumbling setup.[57]
Pakistan watcher Stanley Kurtz wrote in 2007: “Democracy and the constitution cannot be restored in Pakistan because, in any serious sense, neither democracy nor constitutional rule has ever existed there…most elections have been manipulated by Pakistan’s intelligence services…from independence day to the present, Pakistan’s political trajectory has been one long evolution away from the democratic ideals of its founding.”[58]
The political class in Pakistan is still dominated by the owners of large landed estates, who are far from consistent democrats. Their participation in the electoral process is essentially aimed at preserving their traditional power of patronage over a largely poor and illiterate rural populace. The industrial business sector in Pakistan owes its emergence and prosperity to state largesse. Such a “hot-house” entrepreneurial class lacks the political vision and economic independence to support democracy, the optimal political infrastructure for the growth of private commerce. There is no evidence that any significant part of this class has ever resisted military intervention or dominance of the political agenda. It is clearly wedded to an authoritarian dispensation, so long as its links to the state are intact and its short-term profits are secured.[59]
A section of the liberal intelligentsia in Pakistan believes that Pakistani society has demonstrated over time its basic inability to move the country onto a democratic path. These frustrated reformists therefore pinned their hopes on international pressure, enhanced by Pakistan’s economic and strategic dependence on powerful friends like the United States, to push the state of the society along a course of incremental change.[60]
The essentially unreformed military retains the wherewithal to re-enter the political fray as the nation’s self-anointed savior once its public image recovers from the damaging association of Musharraf.[61]
Taxation in Pakistan
Rates of taxation in Pakistan have continuously been very low as compared to the countries with similar level of per capita incomes – despite the widespread awareness that to generate adequate resources for the state decreasing the reliance on foreign assistance, taxes should be broad based. Table 1 presents a comparison of the proportion of tax revenues to GDP for Pakistan and other developing countries:
Table 1:
Proportion of Tax Revenues to GDP for Pakistan and Other Countries (%)
|
Tax |
Developing Countries |
All Countries |
Pakistan |
||
|
Per capita income |
Per capita income |
|
1989/90 |
1992/3 |
|
|
|
|
|
|
|
|
|
Direct taxes |
3.91 |
6.84 |
7.26 |
1.83 |
2.71 |
|
Income tax |
3.27 |
5.53 |
5.11 |
1.75 |
2.58 |
|
Wealth and property tax |
0.24 |
0.31 |
0.40 |
0.08 |
0.13 |
|
Social security taxes |
0.21 |
0.79 |
1.30 |
– |
– |
|
Others |
0.19 |
0.21 |
0.40 |
|
|
|
|
|
|
|
|
|
|
Indirect taxes |
9.85 |
12.32 |
10.34 |
10.49 |
8.85 |
|
|
|
|
|
|
|
|
Others |
0.26 |
0.41 |
0.45 |
0.51 |
0.70 |
|
|
|
|
|
|
|
|
Total taxes |
14.02 |
19.66 |
18.05 |
12.83 |
12.26 |
Source: Pasha and Iqbal, “Taxation Reform in Pakistan,” 50.
It is obvious that Pakistan’s low proportion of tax revenue is striking even in comparison with low income countries. The comparative proportion of tax to GDP for high income countries is 36 percent.
The current Pakistan Economic Survey (2008-2009) states that “the overall FBR tax collection remained less than satisfactory and actually witnessed deceleration in real terms. Resultantly, the FBR tax collection to GDP ratio is likely to deteriorate around 9 per cent of GDP as against the target of bringing it into the vicinity of 10 per cent of GDP.”[62]
Table 2 shows the pattern of revenue and expenditure over the last 18 years, since the changed base of Pakistan’s GDP from 1980-81 to 1999-2000.
Table 2:
Revenue and Expenditure in Pakistan, 1991-2009 as % of GDP
|
|
Expenditure |
Revenue |
||||
|
Year |
Total Expenditure |
Current |
Development |
Total Revenue |
Tax |
Non-Tax |
|
FY91 |
25.6 |
19.2 |
6.4 |
16.9 |
12.7 |
4.2 |
|
FY92 |
26.5 |
19 |
7.5 |
19.2 |
13.7 |
5.5 |
|
FY93 |
26.2 |
20.5 |
5.7 |
18.1 |
13.4 |
4.7 |
|
FY94 |
23.4 |
18.8 |
4.6 |
17.5 |
13.4 |
4.1 |
|
FY95 |
22.9 |
18.5 |
4.4 |
17.3 |
13.8 |
3.5 |
|
FY96 |
24.4 |
20 |
4.4 |
17.9 |
14.4 |
3.5 |
|
FY97 |
22.3 |
18.8 |
3.5 |
15.8 |
13.4 |
2.4 |
|
FY98 |
23.7 |
19.8 |
3.9 |
16 |
13.2 |
2.8 |
|
FY99 |
22 |
18.6 |
3.3 |
15.9 |
13.3 |
2.7 |
|
FY00 |
18.9 |
16.4 |
2.5 |
13.4 |
10.6 |
2.8 |
|
FY01 |
17.4 |
15.3 |
2.1 |
13.1 |
10.5 |
2.6 |
|
FY02 |
18.5 |
15.7 |
2.8 |
14 |
10.7 |
3.3 |
|
FY03 |
18.8 |
16.2 |
2.6 |
14.8 |
11.4 |
3.4 |
|
FY04 |
16.5 |
13.7 |
2.8 |
14.2 |
11 |
3.2 |
|
FY05 |
16.8 |
13.3 |
3.5 |
13.8 |
10.1 |
3.7 |
|
FY06 |
18.4 |
13.6 |
4.8 |
14.1 |
10.5 |
3.6 |
|
FY07 |
20.8 |
15.8 |
5 |
14.9 |
10.2 |
4.7 |
|
FY08 |
22.1 |
18 |
4.4 |
14.6 |
10.3 |
4 |
|
FY09* |
18.6 |
15.8 |
2.8 |
14.6 |
11.3 |
3.8 |
* Provisional estimates.
Source: Government of Pakistan, Pakistan Economic Survey, 2008-2009, 56.
In the 1988 Structural Adjustment Program (SAP) of the International Monetary Fund (IMF)/World Bank, a major fiscal policy goal was to raise the total revenue to GDP ratio from 17.6 percent in 1988 to 20 percent by 1991/92. Steps outlined to increase revenues included increased prices and user charges for utilities such as electricity, natural gas and water. The program also suggested increases in the charges for higher education and health. Along with this identification of measures for raising revenue, it was also decided that tax administration would be strengthened.[63]
However, the implementation of the adjustment program, as evaluated by the IMF/World Bank, was weakest in the fiscal policy domain. Tax revenues as a proportion of GDP remained stagnant, and against the target of 20.8 percent for the year 1990-1991, the actual ratio achieved was 16.5 percent. Although the government had taken some recommended steps, such as eliminating numerous income and wealth tax exemptions, simplifying and rationalizing the tax structure, and applying the general sales tax more widely, there were also policy and implementation failures, such as low taxpayer and sectoral coverage, reduction of import duties, limited progress in reducing tax exemption and concessions, and reduction in trade tax revenues. Further, debt-GDP ratios also failed to improve.[64]
Hafiz Pasha summarizes the key features and problems of the tax system of Pakistan as follows:
Pakistan‘s tax system is characterized by a number of structural problems. First, the overall level of fiscal effort is low and the tax-to-GDP ratio has remained, more or less, stagnant at between 12 to 13 per cent. This is one major explanation why budget deficits have been high, generally in excess of six percent of the GDP. Second, there is overdependence on indirect taxes, which until recently accounted for a share in revenues of over 80 per cent. This has increased the regressivity of the tax system and imposed a higher excess burden of taxation. Third, within indirect taxes there is domination of taxes on international trade, which has promoted inefficiency, distorted the allocation of resources and encouraged illicit trade. Fourth, the effective tax bases of most taxes are narrow due to wide ranging exemptions and concessions and rampant tax evasion. For example, there is less than one income tax assessee per 100 persons and less than 60 per cent of imports actually pay duty. Consequently, tax rates have had to be pitched at high levels, which has created a vicious circle of more tax base erosion and higher tax rates. Fifthly, tax administration is characterized by primitive and out-moded procedures, complex laws and considerable arbitrariness and discretion. The common perception is one of high levels of corruption and inefficiency.[65]
The Non-Tax Revenue Factor in Pakistan
The question of foreign aid led to one of the earliest disputes that arose in Pakistan’s cabinet. The Government of Pakistan turned down proposed US assistance three times in 1950, under the premiership of Liaquat Ali Khan. The cabinet was also split over the question of going to the World Bank for loans the same year. Commonwealth aid was, however, accepted.[66] As security concerns dominated the new country’s policies, further weakening its infrastructure, Pakistan quickly became dependent on foreign assistance.
Table 3 gives the figures of foreign aid to Pakistan since independence in 1947:
|
Years |
Foreign Aid Commitment (Current US$ Millions) |
Aid per Capita |
|
Before 1st Five Year Plan 1947-55 |
453.837 |
|
|
1955-60 |
1,012.799 |
|
|
1960 |
252.17 |
5.49 |
|
1961 |
250.7 |
5.30 |
|
1962 |
375.91 |
7.74 |
|
1963 |
482.38 |
9.67 |
|
1964 |
505.62 |
9.87 |
|
1965 |
494.72 |
9.40 |
|
1966 |
360.01 |
6.66 |
|
1967 |
476.71 |
8.58 |
|
1968 |
400.66 |
7.01 |
|
1969 |
328.11 |
5.57 |
|
1970 |
421.22 |
6.95 |
|
1971 |
413.78 |
6.61 |
|
1972 |
304.89 |
4.72 |
|
1973 |
282.88 |
4.24 |
|
1974 |
444.83 |
6.46 |
|
1975 |
664.1 |
9.34 |
|
1976 |
1,013.89 |
13.83 |
|
1977 |
588.78 |
7.78 |
|
1978 |
635.37 |
8.14 |
|
1979 |
711.1 |
8.84 |
|
1980 |
1,183.11 |
14.30 |
|
1981 |
823.07 |
9.67 |
|
1982 |
915.5 |
10.47 |
|
1983 |
727.86 |
8.10 |
|
1984 |
729.35 |
7.90 |
|
1985 |
769.58 |
8.11 |
|
1986 |
916.52 |
9.41 |
|
1987 |
820.17 |
8.20 |
|
1988 |
1,355.42 |
13.20 |
|
1989 |
1,446.27 |
13.73 |
|
1990 |
1,129.25 |
10.45 |
|
1991 |
1,371.09 |
12.38 |
|
1992 |
1,014.05 |
8.92 |
|
1993 |
1,005.37 |
8.63 |
|
1994 |
1,605.62 |
13.44 |
|
1995 |
823.77 |
6.73 |
|
1996 |
884.06 |
7.04 |
|
1997 |
596.28 |
4.64 |
|
1998 |
1,053.04 |
8.00 |
|
1999 |
732.93 |
5.43 |
|
2000 |
702.77 |
5.08 |
|
2001 |
1,948.23 |
13.77 |
|
2002 |
2,138.19 |
14.75 |
|
2003 |
1,065.7 |
|
|
2004 |
1,421.0 |
|
Sources: World Bank & GDN Online Database (http://devdata.worldbank.org/wbquery); CSO, Twenty Years of Pakistan in Statistics, 322-3
In the 1950s, Pakistan joined the two alliances SEATO (South East Asia Treaty Organization) and CENTO (Central Treaty Organization) put together by the US in a fit of what became known as “pactomania.”[67] The US provided nearly $2.5 billion in economic aid and nearly $700 million in military aid to Pakistan between 1954 and 1964.[68] US military assistance to both Pakistan and India was suspended during the 1965 Indo-Pakistan war.[69]
Gustav Papanek writes that “foreign aid contributed significantly to Pakistan’s growth from the late 1950s; without it, the rapid increase in development in the 1960s could not have been possible.” According to Keith Griffin, in the mid-1960s, the entire social and economic system that had been built up was heavily supported by and sustained through foreign aid assistance. In fact, in the words of Rashid Amjad:
The system which operated in Pakistan came very close to being what we can term a ‘Foreign Aid Dependent Regime’ in which the mechanics of industrial growth were in one way or another made dependent on foreign aid inflows. Once these aid flows slowed down, the system, not being able to replace foreign aid with other forms of external finance like direct foreign investment, and without the peculiar boost to profitability associated with the local system for dispensing aid, found it difficult to sustain the earlier growth it had generated.[70]
During the next 15 years (1965-79), American aid was restricted almost exclusively to economic aid, which amounted in this period to $2.55 billion compared to only to $28.9 million in military assistance.[71]
In 1979, the Carter administration suspended all aid to Pakistan, barring food aid, on account of Pakistan’s development of a uranium enrichment facility.[72]
The 1980s brought the Afghan war against the Soviets, with Pakistan playing the main role as the conduit for supplies and support to the mujahidin. The US attitude toward Pakistan changed soon after the Soviet invasion of Afghanistan. The US alone chipped in $5.3 billion during this period, followed by substantial assistance from other countries.[73]
Throughout the 1980s, Presidents Reagan and George H. W. Bush kept certifying that Pakistan did not possess a nuclear weapon. However, soon after the collapse of the Soviet Union, in 1990, George H. W. Bush refused to confirm that Pakistan did not have nuclear technology, as required by the Pressler Amendment.[74] As a result, most economic and military aid to Pakistan was cut off. Aid dropped from $726 million in 1988 to $24 million four years later. From 1991 to 2000, the US provided less than $500 million in economic and military assistance to Pakistan.
Further sanctions were imposed in 1998, when Pakistan followed India in conducting nuclear tests. An American presidential visit to Pakistan was postponed and, under the Glenn Amendment, sanctions restricted the provision of credits, military sales, economic assistance, and loans to the government. The October 1999 overthrow of the Nawaz Sharif government by General Pervez Musharraf triggered an additional layer of sanctions. At this stage, US assistance to Pakistan was limited to refugee and counter-narcotics assistance.[75]
Between the end of the cold war and the 9/11 attacks, the US distanced itself from Pakistan when many leaders within the US concluded, mistakenly in Korb’s view, that Pakistan had lost much of its strategic and geopolitical value.[76]
However, September 11, 2001 brought about yet another reversal in Pakistan’s fortune as it again assumed the role of a global frontline state. Within a couple of months of the 9/11 attacks, President George W. Bush removed all sanctions related to the nuclear tests and Musharraf’s coup. Since 2003, the President annually exercised the waiver against the anti-democracy sanctions. This led to a redoubling of Washington’s generosity:[77] the US has since given Pakistan more than $11 billion in assistance.[78]
Pakistan is one of the leading recipients of US overseas assistance. However, most of this aid has been provided to military dictatorships or “military-led democracies” in which a uniformed president has remained in power.[79]
According to Newsweek, the consequences of foreign aid have been devastating for Pakistan “for reasons similar to those at work in the so-called natural resource curse”:
Extensive research shows that when governments luck into unearned cash (which economists call ‘rents’) from oil or other resources, the health links that bind them to the citizens are often severed. Freed from relying much on taxes, governments spend the money arbitrarily. Citizens, left untaxed, feel less motivation to monitor things carefully. The result is corruption, misrule, and a host of other ills.
Rents paid for natural resources are bad enough. But ‘strategic rents’ – earned by a country for its role in the foreign policies of other states – are even more damaging. Military aid by definition entrenches the militaries that get it, making them less responsive to civilian control. Pakistan’s military has grown enormously powerful over the years, resistant to democratic checks and highly entrenched in every aspect of the country’s commercial, civil, and political life………
Strategic rents are also susceptible to manipulation. General Pervez Musharraf, for example, has consistently avoided foreign criticism and kept the money coming by arguing, essentially, that while he may be imperfect, the alternative – the Islamists – is far worse.[80]
The pattern is unmistakably clear: the Americans have tended to use their crucial financial and military support selectively against democratic governments. The first large-scale American food and military aid started to pour into Pakistan in 1953, months after the dismissal of its first civilian government. It continued for a decade as Pakistan, under a military regime, joined various US-sponsored defense pacts aimed against the Soviet Union. The US started having problems with Pakistan when an elected government came to power in 1972, but poured billions of dollars into the country when another military regime took over in 1977 and agreed to fight the Soviets in Afghanistan. Similarly, while the elected governments that followed during 1988-99 had to live with a decade of US sanctions, the military regime of Pervez Musharraf, which ousted the last civilian government, remained a well supplied ally in the US “war on terror.”[81]
Conclusions and Recommendations
In Part I, this paper surveyed the literature pursuing:
a) A connection between taxation and representation that is followed by good governance; and
b) A connection between unearned income (rents) of governments and the stability of those regimes.
With regard to the first aspect, it was found that a statistically significant link existed between increased tax burden and, after a few years, increase in levels of democracy.[82] Another research, using a more direct measure of natural resource revenues, found an even stronger statistical connection between increased tax burden, followed by increase in the degree of democracy within a few years.[83]
Concerning the second connection, it was found that there is a strong argument suggesting that foreign aid and oil income (rents) do not possess anti-democratic or pro-democratic characteristics; instead, they tend to stabilize whatever regime is in power enjoying those unearned revenues.
Subsequently, in Part II, the paper looked at the evolution of the state of Pakistan in trying to assess whether the two conclusions derived above are applicable in Pakistan’s polity. It found the following:
a) Pakistan has continuously suffered from low rates of taxation revenue as a proportion of its GDP. Even a cursory look at the political domain clearly shows that representative and democratic institutions could never take root in Pakistan. This is despite a widespread awareness that tax revenues should be broad-based to generate adequate resources for the state.
b) Foreign aid inflows have invariable strengthened and stabilized regimes in power. The three of longest serving regimes in Pakistan’s history were all military dictatorships (General Ayub Khan, 1958-69; General Zia-ul-Haq, 1977-88; and General Pervez Musharraf, 1999-2008). It so happens that foreign aid inflows arrived just in time to provide stability and longevity to all three of these regimes. Foreign aid inflows did not ever arrive in corresponding volume when democratic governments were in place at any time in Pakistan’s history.
Given the substantially low tax-to-GDP ratio for Pakistan vis-à -vis countries with similar per capita income, there is considerable scope for increasing taxation in Pakistan. However, if the thesis advanced in this paper matters, then increased taxes will likely have to be traded off against ‘real’ improvements in representation and governance-i.e., incorporating people’s collective voice, aspirations, and perceptions in delineating not only the tax policy but also public policy in general. This means that taxation arrangements have to fall in line with broadly accepted norms of social justice.
The media and think tanks can play their role in bringing the normative principles of distributing the tax burden to the center of the tax reform debate in Pakistan so as to make those with most ability to pay conscious of the demands on them to fulfill their social obligations. With extreme disparities in income and wealth distribution in Pakistan, scant proceeds from direct taxation reinforce the impression that the privileged are above the law and can evade their tax bills. This imbalance ought to be the first thing undermined through constitutional, legal, and administrative changes.
Unless there is grassroot restructuring of the tax burden in Pakistan followed by visible improvements in governance, if history is any guide, there will be an inevitable increase in peoples’ struggle against the state, whatever external form-Baloch calls for autonomy, Pakhtun determination for Nizam-e-adl, political frustrations in South Punjab, etc.-it may assume. The relevant question to be asked is whether such violence will act as a positive force in promoting and strengthening the representative and democratic institutions, with ultimate beneficial consequences for good governance, or thrust the country back into the era of 1960s, that brought unfortunate results.
Foreign aid has assumed almost irreplaceable proportions in the public finances of Pakistan, to the extent that, under its cumulative weight, Pakistan is now said to be in a debt trap. By using the lever of foreign aid, donors have in the past been able to stabilize-strengthen and prolong-their preferred regimes in this country, military regimes being the most favored, thus undermining the development of representative, democratic institutions in Pakistan. Again, the above suggested enhanced taxation and real representation can go a long way in averting the heavy reliance on foreign aid over time. Bibliography
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[1] Moore, “How Does Taxation Affect the Quality of Governance?” 10.
[2] Ibid., 8.
[3] Levi, Of Rule and Revenue, 1.
[4] Bräutigam, “Taxation and State-Building,” 1.
[5] Moore, “How Does Taxation Affect the Quality of Governance?” 2.
[6] Moore, “Between Coercion and Contract,” 1.
[7] Moore, “Between Coercion and Contract,” 45-47.
[8] Ibid., 48.
[9] Strauss, “Rethinking Institutional Capacity,” 212.
[10] Bräutigam, Taxation and State-Building, 13.
[11] Boix, “Democracy, Development and Public Sector,” 1-17.
[12] Gerring, Thaker, and Moreno, “Centripetal Democratic Governance,” 567-81.
[13] “Do Institutions Really Matter?” 165-87.
[14] Bräutigam, Taxation and State-Building, 12.
[15] Ibid., 2-3.
[16] Moore, “How Does Taxation Affect the Quality of Governance?” 3.
[17] Ibid., 14.
[18] Moore, “How Does Taxation Affect the Quality of Governance?” 14.
[19] Herb, “Taxation and Representation,” 3-31.
[20] Mahdavy described a rentier state as a state that receives substantial rents from foreign individuals, concerns or governments. Hazen Beblawi elaborated the idea of the rentier state further as a state in which the economy is dominated by rents, the rents come from abroad, and the government is the principal recipient of these rents. Furthermore, only a few are engaged in the generation of the rent, while the majority is involved in the distribution or utilization of it (Sandbakken, “Limits to Democracy Posed by Oil Rentier States,” 135-152).
[21] Bräutigam, Taxation and State-Building, 18-19.
[22] Ibid., 23.
[23] Ibid., 24.
[24] Moore, “Between Coercion and Contract,” 34.
[25] Mahon, Liberal States and Fiscal Contracts.
[26] Moore, “Between Coercion and Contract,” 62.
[27] Ibid., 62-63.
[28] Moore, “How Does Taxation Affect the Quality of Governance?” 10.
[29] Ibid.,13.
[30] Ibid., 21.
[31] Sandbakken, “Limits to Democracy Posed by Oil Rentier States,” 135.
[32] Ibid., 136.
[33] Herb, “Taxation and Representation,” 4.
[34] Baunsgaard and Keen, Tax Revenue and (or?) Trade Liberalization.
[35] Sandbakken, “Limits to Democracy Posed by Oil Rentier States,” 138.
[36] Ibid., 139.
[37] Morrison, “Oil, Nontax Revenue, and Redistributional Foundations of Regime Stability,” 111.
[38] Herb, “Taxation and Representation,” 3.
[39] Ibid., 25.
[40] Morrison, “Oil, Nontax Revenue, and Redistributional Foundations of Regime Stability,” 107.
[41] Ibid., 132.
[42] Abbas, Pakistan Can Defy the Odds.
[43] Rahman, Pakistan, 39.
[44] M. Ilyas Khan, “Pakistan’s Circular History,” BBC News, 2007, . http://news.bbc.co.uk/go/pr/fr/-/2/hi/south_asia/6940148.stm (accessed July 6, 2009).
[45] Bhutto, Reconciliation, 167-168.
[46] Rahman, Pakistan, 40.
[47] Official website of the Foreign and Commonwealth Office, http://www.fco.gov.uk/en/about-the-fco/country-profiles/asia-oceania/pakistan?profile=hist… (accessed July 6, 2009).
[48] Cohen, The Idea of Pakistan, 8.
[49] Khan, “Pakistan’s Circular History.”
[50] Hippler, “Problems of Democracy and Nation Building in Pakistan,” 697-701.
[51] Coll, Ghost Wars.
[52] Cohen, The Idea of Pakistan, 10.
[53] Ibid.
[54] Hippler, “Problems of Democracy and Nation Building in Pakistan,” 5.
[55] Ibid., 5-6.
[56] Rahman, Pakistan, 41.
[57] Abbas, ibid, p. 13.
[58] Stanley Kurtz, ‘Democracy Myth, Fantasy Pakistan’, National Review Online, November 26, 2007.
[59] Rahman, Pakistan, 43.
[60] Ibid., 45.
[61] Ibid.
[62] Government of Pakistan, Pakistan Economic Survey, 2008-2009, vii.
[63] Zaidi, Pakistan‘s Economy, 339.
[64] Ibid., 340.
[65] Pasha, “Political Economy of Tax Reforms,” 129.
[66] Mohey-ud-din, “Impact of Foreign Aid” 5.
[67] Kundi, “Politics of American Aid,” 22-39.
[68] Korb, Reassessing Foreign Assistance to Pakistan.
[69] Official website of US Department of State, . http://www.state.gov/r/pa/ei/bgn/3453.htm (accessed July 5, 2009).
[70] Amjad, Private Industrial Investment in Pakistan, 196.
[71] Korb, Reassessing Foreign Assistance to Pakistan.
[72] Ibid.
[73] Devesh Kapur and Arvin Subramanian, “Aid and the Unraveling of Pakistan,” Op-ed in Newsweek, January 21, 2008; available at http://www.newsweek.com/id/91625.
[74] Korb, Reassessing Foreign Assistance to Pakistan.
[75] Official website of US Department of State.
[76] Korb, Reassessing Foreign Assistance to Pakistan.
[77] Kapur and Arvin Subramanian, “Aid and the Unraveling of Pakistan.”
[78] Korb, Reassessing Foreign Assistance to Pakistan.
[79] Kundi, “Politics of American Aid,” 34.
[80] Kapur and Arvin Subramanian, “Aid and the Unraveling of Pakistan.”
[81] Khan, “Pakistan’s Circular History.”
[82] Ross, “Does Taxation Lead to Representation?” 39-49.
[83] Mahon, Liberal States and Fiscal Contracts.
