As much as 60 per cent of Pakistan’s total tax revenue comes from the large-scale manufacturing sector.
Speaking at the Lahore Chamber of Commerce and Industry on Monday, former Finance Minister Dr Hafiz A Pasha said that the prevailing scenario highlighted the imbalance in the tax system.
“The burden on this single sector is four times higher than on the rest of the economy, leaving it struggling to breathe. As a result, the manufacturing sector is moving in the negative rather than showing growth each year”, he stated.
Dr Pasha noted that Pakistan has several sectors with high income potential, such as agriculture. But the tax revenue from these sectors remains minimal, he said, adding that only one per cent of landowners possess 22 per cent of the best agricultural land, but the revenue collection is negligible.
Following IMF directives, the government has estimated just PKR 4 billion in tax collection from the agriculture sector next year, extremely low compared to PKR 4,500 billion collected from the manufacturing sector.
He added that investment in Pakistan has sharply declined. Today, investment in the large-scale manufacturing sector is much lower than it was 25 years ago. The biggest concern is that the depreciating capital stock is not being replenished, which hampers the sustainable growth of the manufacturing sector.
Dr Pasha also emphasised that the export sector and large-scale manufacturing are the backbone of Pakistan’s economy, whereas real estate, a non-productive sector, continues to attract the highest investment. He added that revenue collection from property is just 0.2 per cent, 12 times lower than that from the industrial sector.
He warned that Pakistan currently has 2.1 million unemployed youth, 2.6 million children out of school, and 22 per cent of the workforce without employment, the highest unemployment rate in the country’s history. Additionally, only six per cent of bank credit is available for 3 million small units, while 80 per cent is provided to the government by banks.
LCCI President Faheem ur Rehman Saigol said that Pakistan has not properly utilised its economic potential. The challenges the country faces today are not caused by external factors but by poor policies and governance. He noted that while China and India followed the economic model of the 1960s and achieved growth, Pakistan fell behind. Over the past four months, the country’s trade deficit crossed USD 10 billion.
