FeaturedNationalVOLUME 18 ISSUE # 38

Unfulfilled promises

Within the intricate tapestry of Pakistan’s economic landscape lie unexplored opportunities and pressing challenges. Despite assurances of brighter days by successive governments, the economic roadmap remains hidden from public view. To forge a path of sustained growth, it is imperative to democratize economic ownership and ensure inclusivity.

Our governing authorities withhold their envisioned economic strategy from the public, offering assurances of a prosperous future that consistently fails to materialize. In order to chart a sustainable path of growth, it is imperative to democratize economic participation and encompass the masses. Observing the plethora of opportunities within our nation prompts one to ponder over the dilapidated state of our economy. The explanation is straightforward: we have neglected to harness these opportunities. The non-payment of taxes in taxable sectors is purportedly as high as a trillion rupees. Manufacturers obscure their actual production figures, while importers devalue their imports to reduce levies. Remarkably, nearly half of the taxable earners avoid paying any taxes altogether. Additionally, 25 percent of incomes are exempted from taxation, including earnings from agriculture, stocks, and real estate. This magnitude of issues is not prevalent to the same extent in countries like India, Bangladesh, Vietnam, and Cambodia, which are achieving robust growth due to their broader tax base. Eliminating tax evasion could lead to a substantial budget surplus that could be channeled into development.

Upon contemplation of the multitude of opportunities that abound within our nation, one cannot help but be struck by the stark contrast with the lamentable state of our economy. The reason behind this disconcerting incongruity is as straightforward as it is disheartening: we have, regrettably, allowed these opportunities to languish untapped. This failure to capitalize on our potential has resulted in a crippling drag on our economic progress.

A particularly glaring issue that exacerbates our economic challenges is the pervasive issue of tax evasion. The extent of this predicament is staggering, with estimates suggesting that the amount lost to non-payment of taxes in sectors that should contribute significantly to our revenue stands at a staggering trillion rupees. This is not merely a minor oversight, but a systemic weakness that erodes the very foundation of our fiscal health.

Manufacturers, meanwhile, are contributing to the opacity surrounding our economic landscape. By shrouding their actual production figures, they undermine the accuracy of our economic assessments and inadvertently hinder our ability to make informed policy decisions. Likewise, importers engaging in deliberate undervaluation of their imports are not only evading their rightful financial obligations but also undermining the integrity of our economic data. Equally alarming is the alarming prevalence of taxable earners who have successfully sidestepped their duty to contribute to the nation’s coffers. Shockingly, nearly fifty percent of those who should be paying taxes are evading them entirely, siphoning resources away from public services and infrastructure development. This evasion further strains the limited resources available for the government to address pressing societal needs.

Adding to the complexity is the fact that a substantial proportion of incomes – twenty-five percent, to be exact – are exempted from taxation. This includes earnings derived from key sectors such as agriculture, stocks, and real estate. This tax-free status for significant portions of income perpetuates a skewed distribution of the tax burden and undermines the principle of a fair and equitable tax system.

The contrast with other nations is glaring. Countries like India, Bangladesh, Vietnam, and Cambodia, which have managed to achieve impressive economic growth, owe part of their success to a more comprehensive tax base. The broader net they cast ensures that a larger portion of economic activity contributes to national revenue, fueling development and progress.

The antidote to our economic malaise lies in addressing the issue of tax evasion head-on. By plugging the leaks in our revenue collection system, we stand to gain not only a more accurate reflection of our economic health but also a substantial surplus in our budget. This surplus, if channeled thoughtfully and strategically into development projects, could catalyze a transformative change in our economic trajectory.

In conclusion, our nation’s untapped potential is a source of both frustration and hope. While we may find ourselves mired in economic challenges, the solutions are within our grasp. By tackling tax evasion, rectifying the underreporting of economic activities, and embracing a more inclusive tax regime, we can create a virtuous cycle of growth, development, and prosperity that benefits all strata of society. The opportunity is ripe, and it is our responsibility to seize it for the betterment of our nation and its citizens.

However, bringing tax evaders under the tax umbrella remains an elusive dream in Pakistan. The majority of the bureaucracy thrives on the informal economy’s generated income. If the reported tax evasion of Rs9 trillion, an amount equivalent to the current year’s tax revenue target (which might seem exaggerated to some), is scrutinized, the bureaucrats or rent seekers only manage to capture Rs900 billion, leaving a staggering Rs8.1 trillion for the privileged class. This further widens the income gap between the elite and the ordinary citizens, rendering us dependent on both domestic and foreign loans. These loans are taken to repay previous loans, thus escalating the debt burden annually. The Pakistani government pays market-based interest on these loans.

Back in 2013, Ishaq Dar asserted that Pakistanis had stashed $200 billion abroad. This sum has likely grown to at least $300 billion by now. While our foreign debts approach $130 billion by the end of December, repatriating the illicitly parked funds could enable Pakistan to settle all its foreign debts and still add $170 billion to its foreign reserves. However, the challenge lies in the fact that these offshore assets belong to influential figures in Pakistan. No one is willing to take action against them due to the potential consequences, which could even involve elimination.

Furthermore, investments in the social sector often go to waste. Pakistan possesses a sufficient number of government schools to provide primary and secondary education to all underprivileged children. The allocated budget is also substantial. Although public schools employ qualified teachers, many are dysfunctional and reportedly graduate illiterate students after nine years of schooling. Some schools exist merely on paper, with the funding disappearing into pockets. The presence of “ghost teachers” who receive salaries and benefits without actually teaching exacerbates the issue. Rectifying and elevating the quality of existing schools could considerably enhance the nation’s human capital each year.

The health sector’s budget may appear insufficient, but the facilities in state hospitals, clinics, and basic health units are deplorable. VIPs receive top-notch treatment on modern equipment reserved exclusively for them, while these devices remain inoperative for the average citizens. Specialist professors see a handful of patients during their eight-hour hospital shifts, yet they attend twenty times more in their private clinics over a shorter span. Basic health units even have absent doctors. Utilizing the existing budget to overhaul the healthcare system could provide substantial relief to the marginalized population.

In conclusion, Pakistan stands at a crossroads where strategic choices must be made to steer the nation towards prosperity. By shedding light on the hidden intricacies of the economy and acknowledging the urgent need for tax reforms and social sector enhancements, we have a chance to break free from the cycle of unfulfilled promises. Empowering the masses with economic participation, holding tax evaders accountable, and revitalizing education and healthcare can create a transformative impact. As we unravel the complexities and embrace reform, Pakistan can rise to meet its true potential on the global stage.