The distribution of wealth in a utopian society should not be based on charity. Ideally, the state would be responsible for the basic needs of the citizens, who (based on the social contract theory) would pay their due taxes in exchange for government services.
IMF papers report an inverse correlation between corruption and taxation: some of the countries perceived to be the least corrupt, such as Sweden, Denmark and Canada, have the highest tax burdens. On the other hand, countries with a high reported incidence of corruption, such as Nigeria, Pakistan, Bangladesh, India and Venezuela, have some of the lowest tax collection rates.
For instance, in Pakistan there is a general trust deficit between the government and its citizens, resulting in low tax revenue. Furthermore, the purported corruption in the tax-collecting authority is only made possible when tax-evading corporations and wealthy individuals take an active role in this corruption by paying bribes to dodge their official taxes.
There is such mistrust of the system many citizens prefer to take their money out of the bank just before the 1st of Ramadan, the day of the holy month where zakat (2.5% of annual savings, a religious obligation Muslims must give as charity to the poor) is automatically deducted from bank accounts and diverted to the government’s distribution system for the poor. The only way to avoid zakat in Pakistan is to declare the account holder is “non-Muslim” or has a non-savings account.
These Pakistanis prefer to give zakat from their own hand to deserving people they personally know instead of a random collection by the government through obscure channels of distribution. In an ideal system the government usage of this fund would be so transparent people would not withdraw their savings to avoid zakat.
In the same vein, government appeals for official disaster relief funds set up by presidents and prime ministers receive less funding than personal charity groups, again for the same reason: distrust of equitable and transparent usage of donations.
The obvious question becomes if the government is not providing for the basic needs of its people, who is? It is not a coincidence that formal/informal philanthropic activities are generally high in such countries where tax collection is low due to the perception of government corruption. These quasi-fiscal arrangements are substitutes for taxes and public expenditures.
The partial failure of the government machinery in collecting taxes and providing adequate public goods and services has resulted in an implicit social contract of rich individuals contributing generously towards providing food, health and shelter for the poor. It is true that charity begins at home, as throughout the Indian subcontinent, the Baradari (literally brotherhood) system of clans/classes is active. These ties can be familial, racial, or religious and the distribution of charity is often around these lines.
For instance, in a wholesale market of Faisalabad, if a businessman dies at an early age, the clan ensures his family is provided for. Similarly, those who can afford servants also often take care of their domestic help’s family needs, even financing the dowry of their daughters.
A Pakistan Centre for Philanthropy study reported in 2011 in Punjab, individual philanthropists managed to collect and spend 30% more than what the Punjab government budgeted for social sector development.
Apart from individual charity, there are numerous multilateral and bilateral donors operating in Pakistan including The World Bank, Asian Development Bank, USAID and Department for International Development to name a few. Their development funds run into the billions of dollars per annum. There are also a few trusts which, though started by individuals, have grown quite large over time because of their credibility and the direct philanthropic acts they perform. For example, the number of ambulances operated by Edhi in Karachi is higher than by any service in any large city in the world. Similarly, the Chipa Trust feeds around 100,000 people in Karachi per day.
Another avenue is to “whiten” one’s “black” money by doing charitable acts involving money instead of paying taxes, such as offering charity not as money laundering but as a religious obligation/merit, though this still avoids taxes. There are many hospitals where the cost of food for patients and their attendants is entirely funded by successful business groups, but these groups then underreport their profits to tax authorities, reducing the tax revenue the government receives.
Similarly, trade unions of various markets openly donated to relief efforts for natural or man-made disasters in the country the past few years, but every time the state tried to impose increased sales tax on them, the unions rebelled by going on strike or protesting in the streets. Philanthropy is also “used” as atonement for sins, as there are many shrines where food is distributed daily free of cost to the poor. One of the reasons for doing so is “erasing our sins”.
Volunteerism and charitable acts by the social wings of banned terrorist/religious-based political organisations are also quite popular. The ideological beliefs and purported acts of such organisations are not questioned by the masses; instead their presence and outreach in times of disasters are a source of inspiration for people, who openly donate to them.
This is because they establish their presence in public relief areas of disaster zones, organising camps and distributing food and clothing amongst those affected, thereby neutralising or even erasing their prior reputation. Businessmen with questionable sources of income or facing open allegations of bribery have also bolstered their reputation by giving publicly for the “greater public good.” One such tycoon recently pledged a massive portion of his declared income to philanthropy; another well-known smuggler set up a state-of-the-art facility for disabled children.
Even the government uses this strategy, loudly tooting its own horn through publicity of its “charitable” (read: heavily subsidised) projects. An example is the provision of subsidised wheat roti, the staple food of the country, instead of creating better regulations against wheat hoarding or creating sustainable development schemes for entrepreneurship.
This approach also translates to individual philanthropic acts, where citizens - despite the goodwill of their gesture - give freely for direct acts such as building a mosque, feeding the hungry, buying medicine for the sick, etc., instead of something with more long-term results, such as educating a child or investing in teaching someone a skill so they can be empowered to earn on their own. In such cases, it seems two wrongs do make a right!