Economic road of Pakistan
EVEN though Pakistan’s economic crisis in 2022–2023 is a recurring one and a factor in the country’s political unrest, it has a history of ignoring the nation’s real issues which include subpar governance, a dysfunctional judicial system, outdated laws, a complex tax system, a lack of transparency, duplication in the government system, ineffective bureaucracy, improper use of our human, natural and water resources, a lack of effective local government. The development of important sectors and investment prospects has been hampered by inadequate revenue collection, structural difficulties and governance issues.
There are further worrying problems that are impeding the growth of our economy. Internationally, Pakistan is ranked 173rd for tax payments. In comparison to the tax burdens of Hong Kong, the United Arab Emirates, Ireland, Malaysia, Sri Lanka and India, the nations with which Pakistan must compete, Pakistani business people pay 47 taxes annually, according to a World Bank report. Five corporate income taxes, twelve employer-paid pension contributions, twelve Social Security payments, one property tax, one professional tax, one vehicle tax, one stamp duty payment, one fuel tax payment and twelve payments of goods and sales tax are all paid annually by a single business that operates in four different provinces.
In addition, Pakistan slipped 23 ranks on the indicator for the accessibility of corporate loans. The country dropped from 82nd to 105th place this year. Due to the government’s rising budget financing requirements, there wasn’t much money left over to support the company’s expansion. Pakistan is ranked 161st out of 192 countries in terms of Human Development Index (HDI) as of 2022, which is 0.544. Pakistan’s HDI is one of the lowest in Asia, just after Yemen and Afghanistan. On the indices for registering firms and properties, the nation slipped one spot, moving to positions 142 and 170, respectively. The duration of each of the 12 treatments is around 18 days. Similar to that, registering a property took a long time.
Pakistan is ranked 136th in the world overall and 172nd in terms of tax compliance by the World Bank’s Ease of Doing Business Index. These rankings indicate that the complicated processes of the government, a lack of transparency and complicated tax rules & regulations are currently the main barriers to economic investment. Furthermore, the federal government must give export promotion tactics top priority in order to increase foreign exchange revenues. Increasing export competitiveness, broadening export product lines, assisting exporters and finding new markets through trade agreements and diplomatic initiatives can all be done to achieve this.
According to the Paying Taxes report by the World Bank, the development of online tax filing and payment is specifically assessed by the sub-indicators of the overall measure of paying taxes, such as the number of payments and time to comply. As the number of IT-enabled tax system procedures rises, the severity of these signs reduces. In terms of overall taxpayers, Pakistan is ranked lower among the Asian Pacific countries. In other words, higher magnitudes of the “number of payments” and “time to comply” indicators, like in the case of Pakistan, indicate a lack of efficient IT-based systems in the processes for collecting taxes. Therefore, the IT project has the potential to improve Pakistan’s standing in terms of tax compliance and business.
There are several steps that can be taken to address Pakistan’s fiscal and economic problems and clear the way forward, including improving tax administration and enlarging the tax base by bringing in more people and businesses. In order to boost tax collection, reduce the informal economy, combat tax evasion and improve tax collecting procedures through automation and digitization, it is essential to promote economic documentation. A sound debt management strategy is also crucially required in order to successfully reduce dependency on external borrowing and manage the current debt burden.
Additionally, it is essential to make conducting business simpler by streamlining regulations and removing administrative hurdles in order to promote investment and job growth. Acting in important sectors like industry, information technology and agriculture is also essential. The ease of doing business is boosted by removing bureaucratic red tape and streamlining regulatory procedures. Supporting public-private partnerships and working with foreign organizations to share expertise are also essential. Transparency, accountability and efficiency in public financial management must also be implemented in order to strengthen our institutional capability and governance and justice frameworks. Additionally, it is critical to keep using anti-corruption strategies that work and implementing harsh consequences for corrupt behaviour.
In order to effectively address Pakistan’s aforementioned economic and governance problems, a comprehensive and multifaceted approach is also necessary. This necessitates concerted efforts from the government, corporate sector, civil society and international partners in order to implement reforms, improve income collection and ensure effective resource allocation for long-term economic growth and development. It is crucial to pursue bilateral trade agreements while participating in regional forums like CEPC, the Belt and Road Initiative (BRI), Shanghai Corporation and countries in Central Asia and the Middle East. Pakistan should also establish an independent institution and provide a one-window facility to actively participate in regional and global economic integration activities, and, most crucially, to draw in Pakistanis from outside for their financial investment and economic participation.
—The writer is practicing Advocate of Supreme Court. He has earlier served as Chairman Customs, Excise and Sales Tax Appellate Tribunal, Senior Advisor Federal and Tax Ombudsman.
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