Tax reforms must for aid: U.K. panel

They ask why British taxpayers should pay for basic services in Pakistan when its elite are not

In a move that will cause embarrassment in Islamabad, a high-level cross-party committee of British MPs on Thursday called for withholding further aid unless there was “clear evidence” that it was making serious efforts to tackle tax evasion by its elite, including politicians, and fight corruption.

The committee said there was no reason why British taxpayers should to foot the bill for basic services such as education and health there while its own elite were not paying taxes. “Any increase in the U.K.’s official development assistance to Pakistan must be conditional on Pakistan increasing its tax collection and widening the tax base. We cannot expect the people in the U.K. to pay taxes to improve education and health in Pakistan if the Pakistan elite is not paying income tax,” said the House of Commons International Development Select Committee.

In a scathing report, it accused Pakistan of misusing British aid.

“In the past, donor money has not been spent effectively in Pakistan for a variety of reasons. Corruption is rife in a social order based on patronage and kinship networks. Pakistan’s rich do not pay taxes and exhibit little interest in improving conditions and opportunities for Pakistan’s poor,” it said.

The report came as Britain planned to double the amount of aid it gives to Pakistan, making it the largest recipient of British aid.

Sir Malcolm Bruce, Liberal Democrat chairman of the committee, said there was no issue with assisting Pakistan’s poorest, but “it was a question of how justified it is to increase it rapidly at a time when wealthiest people in Pakistan are paying little or no tax.”