Illegal trade a threat to Pakistan’s economy

Former FBR chief calls businessmen biggest hurdle in documenting economy


Our Correspondent January 01, 2021
This leads to 5.5% widening of trade gap that stands at $16.9 billion. PHOTO: REUTERS

LAHORE:

Illegal trade is a major threat to the country’s economy and there is a dire need for documentation to address the issue, said former Federal Board of Revenue (FBR) chairman Shabbar Zaidi.

Speaking at a webinar titled “Illegal Economy Tax Net”, Zaidi said all state institutions in Pakistan, including the government, judiciary, intelligence departments, etc were keen to document the economy. “But businessmen are reluctant to accept documentation,” he highlighted.

“There is a public perception that as chairman of the FBR, I faced more resistance from the government or the bureaucracy. The fact, however, is that the biggest resistance came from the business community,” he pointed out.

Terming the opposition by the business community short-sighted and limited-thinking, Zaidi added, “Due to this limited thinking, we could not compete with the growing regional trade and this trend is affecting Pakistan’s major trade associations and chambers.”

He revealed that cigarettes were on top of the list of undeclared and unregistered products sold in the market. More than 30% of cigarettes sold in the country were unregistered and undeclared, which was an important source of tax evasion. Zaidi said in order to curb the illegal sale of cigarettes and tax evasion, he tried to implement a track and trace system but could not succeed.

The former FBR chairman identified cigarettes, packaged spices, sugar, batteries, electronic products, motorcycles, bicycles, cement and consumer goods as products whose actual production and sales far exceeded the indicated production. “These undocumented products have become a major source of tax evasion.”

He emphasised that Pakistan could not develop its economy on a sustainable basis without documenting it, adding that organised business had been made difficult in the country and on the contrary, supportive policies had been framed to promote individual business.

In Pakistan, there is huge tax on doing business in the form of a company while individual traders are not being asked. The company cannot open a foreign currency account while there are no restrictions on opening an individual account. “These are the policies through which organised businesses are deliberately discouraged.”

Zaidi highlighted that one of the major reasons for illegal trade in Pakistan was the high tax rate.

Published in The Express Tribune, January 1st, 2021.

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