Efficient resource utilisation and broadening tax regime could rescue Pakistan’s economy from its current crisis, speakers concluded at a seminar on Monday. The seminar, “Forthcoming budget 2011-12: Opportunities and Challenges” was jointly organised by Sustainable Development Policy Institute (SDPI) and ActionAid Pakistan.
“The country has never experienced such a grave economic situation,” said Dr Syed Nazre Hyder, senior economic advisor at SDPI. Pakistan is facing numerous challenges simultaneously and few options are available to policymakers to pull the economy out from “the edge of abyss”.
He said that while the current fiscal deficit is much higher than targeted, revenue collections are not only falling short of target but form the lowest tax to GDP ratio as compared to other developing countries. He said that while heavy subsidies are being given to public sector enterprises, the government is also incurring heavy payment of inter-corporal debt, coupled with inflation.
Besides, he underlined that unanticipated expenditures on rehabilitation of displaced persons, and rehabilitation and reconstruction of unprecedented flood-affected areas have been some of the key challenges.
Former chief economist at the Planning Commission of Pakistan Dr Pervez Tahir recommended “widening of tax regime instead of focusing more on current reinforcement of rigorous taxation on existing tax payers”.
He said out of the country’s 2.4 per cent growth rate, 2.2 per cent is derived from services sector alone, while the major sectors such as agriculture and industry are unable to contribute to this growth. He said the country’s biggest expenditure is military expense, but the institution has been only efficient in governing the people; now unable to even defend itself.
Former principle economic advisor of the Ministry of Finance, Sakib Sherani, said Pakistan has sufficient resources but has been unable to harness them due to bad governance and unnecessary expenditures. He estimated that over Rs700 billion can be collected through widening of tax bracket, 330 billion rupees can be saved by addressing leakages and irregularities in public sector expenditures. He said the power sector crisis was also costing 3.5 % of GDP. “We have no fiscal constraints but we have institutional and governance crisis” he underlined.
Mukhtar Ahmad Ali, executive director, Centre for Peace and Development Initiatives (CPDI) highlighted that 95 per cent of the education budget - which is a meagre 2 per cent of the total budget - is allocated for salaries, leaving little resources for improving the quality of education. He said there is a “missing focus on gender disparities in education” as out of the 42 new colleges and institutions built in 2008-09, only 8 were for women.
Another speaker, Hafiz Idress of Income Tax Bar Association Rawalpindi highlighted inefficiencies in the federal board of revenue and suggested broadening of the tax net, while also making national tax numbers (NTN) compulsory for every transaction, sale, purchase, transfer and gifts.
Published in The Express Tribune, May 24th, 2011.
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