Another amnesty

The government is making efforts to keep the wheel of the economy moving; this package is a step taken in a vacuum

The prime minister has unveiled another incentive package — this time for the industrial sector. The package aims to attract investment for the sector through a series of measures, including tax holidays and tax breaks. While the government is making hectic efforts to keep the wheel of the economy moving; this package, at best, is a step taken in a vacuum. Bolstering industry at the expense of the rest of the economy is no recipe for success. In fact, the tax amnesty included in the package, coupled with the tax holidays, will almost certainly lead to a loss of government revenue in the medium term, if not also long term.

Incidentally, this is the third amnesty offered by PM Imran Khan, who railed against such measures when he was an opposition figure. To paraphrase from his own language from past years, people with illegal wealth can now whiten their black money by investing in industry, which is literally one of the most prized forms of money laundering for groups such as the Italian mafia. Where nations of laws do their best to catch crooks when they try to make such investments, Pakistan is offering a federal seal of approval. Previous amnesties — in the construction and real estate sector — were accepted as Covid-related exigencies. These amnesties too caused severe losses to the middle class, who were priced out of these sectors as an ironic side effect of the government’s efforts. With industry, especially the export industry, an amnesty could well draw the attention of regulators in export destinations, as the move may be considered illegal support for industries, which could lead to the imposition of tariffs or even bans on Pakistani goods.

Even if these worst-case scenarios are avoided, whether or not any gains from the package trickle down to average Pakistanis remains to be seen. What is certain is that the package has been drawn up with the interests of overseas Pakistanis in mind — the people who have suffered the least, and arguably gained the most from the economic turmoil of the past three-odd years. Given that we are approaching election season, this may also help the ruling party secure votes from the roughly nine million overseas Pakistanis.

Published in The Express Tribune, March 3^rd, 2022.

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