ISLAMABAD: Pakistan loses a whopping Rs3,100 billion annually, which if secured, could change the destiny of the country and its hard-pressed people, an international banker and economist says.
Dr Shahid Hasan Siddiqui, chairman and chief executive of Research Institute of Islamic Banking and Finance, Karachi, says Pakistan loses Rs1,200 annually because of corruption and another Rs1,900 billion because of tax evasion and non-imposition of taxes by the federal and provincial governments.
He said that the country’s economy is badly hurt by corruption, tax evasion, non-imposition of taxes on the rich and powerful, large size of black economy, lack of political will to unearth assets of billions of rupees acquired from concealed income though details of these assets are available in the government record, including bank deposits, amount invested in National Saving Schemes, shares and stock exchange, real estate and vehicles, etc.
He said that details of these assets are available in the records of banks, government departments and housing authorities, etc. and if compared with the income tax returns, would generate revenue of a few hundred billion rupees in a short span of time. “This would also go a long way in the documentation of the economy,” he said adding that this would also enable the government to reduce the rate of reformed GST to five percent from the existing 16 percent and abolish all sorts of surcharges and petroleum levies for the benefit of the people.
Such a step, he said, would bring immediate relief to the common man and would help reduce inflation to a single digit. The petrol prices, he said, would come down by Rs15 per litre and this would have a positive effect on the lives of the ordinary souls.
Explaining the details of his assessments, he said that according to Transparency International and World Bank, 40 percent of the development budget of the country was misappropriated or corrupted i.e. Rs280 billion out of the total Rs700 billion development expenditure.
In addition, he said corruption and misappropriation from government procurements also cost the exchequer a few hundred billion rupees more besides Rs300 billion loss due to corruption in the public sector enterprises.
He lamented that only 1.8 million out of 180 million population pay income tax whereas there are innumerable corporate concerns that earn millions but declare income of mere Rs100,000. He said the export sector hardly contributes to the income tax revenues whereas the agriculture sector, whose share in the GDP is about Rs3,620 billion, pays hardly a few billions as tax.
Siddiqui added that stock exchange’s market capitalisation is Rs3,600 billion but has been taxed only last year and that too half-heartedly. Referring to the 2007 economic survey, he said that the official estimates disclosed that since there was no gain tax on stock exchange, so the country lost Rs112 billion in one year. “Now it has been imposed but half-heartedly to generate a couple of billion rupees only.”
He added that Pakistan’s powerful cement, sugar and textile sectors hardly pay any income tax whereas properties and bank deposits are mostly not declared and thus no income tax is given. He added that GST is paid by ordinary people but it is not fully deposited with the FBR.
Similarly, he said, professionals like engineers, doctors, lawyers and architects don’t pay income tax on most of their income. He added that the tax-to-GDP ratio in Pakistan is 9.5%, which is the lowest in the region. In the regional countries, this ratio is between 14-18 percent. “If we improve our tax ratio to 16 percent, it would mean generating additional taxes of Rs1,400 billion annually,” Siddiqui said.
He also talked of fictitious exports and imports, which he said are about 25% of the total exports and imports. Quoting official figures, he said the total rise in exports recorded by the State Bank during the period 2002 to 2007 was $7.8 billion, out of which $5.5 bn was fictitious.