Washington: According to Princeton economist Atif Mian, the relationship between power and plots in Pakistan has had a significant impact on the economy. He urges the government to refocus its attention from non-reproducible to reproducible variables.
The Pakistani-American economist issued a warning on Thursday on the country’s low productivity and high consumption caused by the power-plot connection.
Mian characterizes land and property as “inefficient,” with Pakistan producing one of the lowest percentages of revenue from them. In order to solve this problem, he recommends raising the property tax.
Pakistani investor Maaiz Khan, in response to the proposed hike, claims that increasing property taxes might be “an unpopular position since it would disproportionately hurt the elite.”
A second analyst, posing as a Harvard data linguist, claims that Mian has identified the fundamental structural issues facing Pakistan’s economy. “Economic and political restructuring is necessary to manage Pakistan, as it is a simmering cauldron that could explode at any time,” the warning reads.
Noting that “land is one of the favorite assets through which the powerful extract rents from the economy,” Mian also brings up the arrest of General Faiz Hameed on allegations of harassing a land developer to extract valuable land.
He contends that the legality of the powerful’s methods of acquiring land does not automatically make them desirable or just. He cautions, “In reality, the deep-rooted connection between power and plots in Pakistan is seriously damaging the economy.”
Mian says that Pakistan’s electricity industry as a whole has turned into a “zombie sector” that is “sucking the blood out of the rest of the economy” in another X message.
He draws attention to the fact that, despite the industry operating at a loss overall, Pakistan is selling power at one of the highest prices in the world: roughly 21 cents per kWh (taxes included).
“The government is charging an exorbitant price to keep the zombie alive,” he continues, adding that the true market price of electricity should not surpass 8 to 9 cents per kWh.
Mian offers three workable strategies for generating income from land value: pricing the increase in market value that results from upzoning and using the proceeds to finance public spending; holding an annual tax on a portion of the land’s market value; and auctioning public land through a competitive bidding process.
Mian compares Pakistan, where the powerful have concentrated on siphoning off land value through various programs, with China, which he calls “the most noteworthy example” of producing revenue from land. He continues, “Unlike China, almost no land value in Pakistan goes to the public exchequer.”
In terms of both GDP and overall tax revenue, Mian claims that Pakistan has some of the lowest property revenue rates.
He notes that “an intricate alliance of the powerful has developed over time to convert public land value into private property, rather than using land to raise much-needed public funds.”
This is perhaps also the reason that land value is exempt from taxes. For instance, the most recent budget shielded army personnel’s and officials’ property sales from taxes despite tremendous strain brought on by the fiscal deficit.
