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The art of giving

Negotiating the argument that some people prefer to do philanthropy instead of paying taxes to the state with academics and economists

The art of giving

Many Pakistanis see giving charity as a sacred duty, be it a small act of inserting a couple of coins in a donation box or donating in hundreds of thousands of rupees to a charity or welfare organisation. But philanthropy may not always be a simple act of caring or kindness; it can sometimes be devious and dodgy, expressed in the form of evading tax, whitening black money, or just showing off.

Whatever the motive, data shows that people do readily give charity in Pakistan. According to Pakistan Center for Philanthropy (PCP), an Islamabad-based research organisation that exclusively collects data on philanthropy in Pakistan, the latest yearly philanthropy estimate for Sindh is Rs67 billion per annum. For Punjab, it is Rs104 billion per annum, according to a PCP study published in 2010.

“We’re in the process of compiling data on individual philanthropy across Pakistan that we will publish soon. According to our last study on individual charity in Pakistan published in the year 2000, the amount Pakistanis gave in 1999 as charity was Rs70 billion per annum. Interestingly, at that time, the social development budget for the country was Rs80 billion,” says Mansoor Sarwar, Senior Programme Officer, PCP.

There are interesting indicators about the motive of people giving charity. “The impression seems to be right that many people prefer giving charity than paying taxes. And there is some research here and there to support this argument,” says Dr Kaiser Bengali, a senior economist.

“There are two types of charities mainly: for religious institutions and for welfare organisations. Some people prefer to give charity because they do not get anything in return from the state for paying taxes, in terms of any services,” explains Bengali.

Asad Sayeed agrees with Bengali. “It is true by and large that some people prefer paying charity, especially religious charity, than paying taxes to the government as they believe that the government does not pay them back in the shape of any benefits.”

Sayeed points to the global trend, “People’s reluctance to pay taxes is more or less the same anywhere in the world, unless you’re talking of a socially very civilised society, such as the Scandinavian countries. Our state is particularly weak in this regard.”

Read also: Donating, the non-traditional way

Adil Najam, Dean, Frederick S. Pardee School of Global Studies, Boston University, is the author of “Portrait of a Giving Community: Philanthropy by the Pakistani-American Diaspora” published in 2007 by Harvard University Press. “People clearly see their private philanthropy as ‘service to society’ and as a religious duty, but I am not convinced that they view it as a ‘substitute’ for taxes or do philanthropy in ‘lieu’ of taxes. Although I am sure some of them who do not pay taxes (or their fair share) do use their philanthropy as an excuse for not paying taxes, I do think it is an excuse. In fact, you will find that many of the country’s largest tax payers are also its largest philanthropists,” he says.

“To the extent,” says Najam, “that an argument is made that some people do philanthropy or charity instead of paying taxes, I think it is an excuse and a bad excuse at that. Because it is, in a real way, defying the state and our responsibility to the state and society. Not paying taxes, in that sense, is an act of rebellion.”

So, has this trend of people giving charity or zakat on their own and its lack of trust in the government’s system of taxation increased over the years? Dr Pervez Tahir, former chief economist Planning Commission, believes that is so. “But I believe people use this lack of trust issue as an excuse. The thing is that people want to evade taxes that is why they come up with such a bogus argument.”

Tahir traces the origins of this line of argument, “This trend dates back to the colonial times when people did not want to pay taxes to the British government. To this day, the idea of the state has somehow not ingrained in their minds.”

Bengali believes that the state’s moral legitimacy to impose taxes is eroded. “In this situation, it is not surprising that some people want to pay to institutions like Edhi Foundation, The Citizens Foundation, or Shaukat Khanum Cancer Hospital, which have credibility, than pay tax to a ‘corrupt’ government.”

Bengali suggests that “to turn this around, the government will have to show that it transparently and properly utilises the tax money and provide the physical infrastructure and services, etc, so that a tax is not seen as extortion money but as something which supports the state and the people.”

Sayeed looks at the contours of charity trends in our society, “In a deeply religious society such as ours, the share of private philanthropy is much greater than what the government collects as zakat. But people seem not to understand that the scope of the government’s taxes in terms of its utilisation is much bigger than the scope of private charity. Government taxes are also used for running the state.”

Tahir does not think philanthropy has increased in our society. “People are not very charitable, I believe. And it is not very easy to collect data about the state of philanthropy in Pakistan and to establish that people give huge amounts of money in charity. Sometimes people just show off. Their main aim is to evade taxes.”

Mansoor Sarwar of PCP corroborates Tahir’s view saying, “Collecting data may take months, even years, depending on the nature and extent of the survey. Household surveys are done with the help of our partner organisations.”

“For example, if we have a target area of say, one thousand households, research specialists would choose 50 or so random households, keeping in view that they are broadly representative of the class we want to survey and are spread over the entire area, and then apply that information to the rest of the households in that particular area,” says Sarwar.

To come back to the subject of charity and taxes, Adil Najam says, “The more common excuse for not paying taxes is that one is not sure if that money will be appropriately spent. Charity gives people more ‘control’ over spending, while taxes are spent according to how the parliament, government and bureaucracy spend it. In this sense taxes — or not paying them — is a sign of the confidence (or lack of) that people have in government and in democracy.”

He also points out that “not all charity is totally altruistic and is often ‘strategically’ used to advance own goals — from social vision to political preferences to self-aggrandisement.”

Najam compares Pakistani and US Muslims when it comes to charity, “The reason I think it is an excuse is that in the Pakistani Muslim context people tend to base charity on religious motivation much more than societal purpose. Even in the US, where there are significant tax benefits to charity and philanthropy many Pakistanis and Muslims choose not to take advantage of that benefit because they believe “charity is for Allah” and its “ajar” will come from God and not in tax benefits.”

“My own strong sense is that those who do not pay taxes do so for their own reasons — usually low faith in government and low sense of citizenship — but they then use the charity argument as an excuse,” he adds.

“From Bill Gates in the US to Syed Babar Ali in Pakistan, the most thoughtful philanthropists seem not to see any duality between paying taxes and returning to society in philanthropy,” concludes Najam.

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