IPS pre-budget seminar: Experts urge strong institutional framework

Inefficient tax mechanism, subsidy system banes of the economy.

ISLAMABAD:

It is the strong and robust institutional framework, not merely annual accounting exercises in the name of budgets and projects that can lay concrete foundations for the economic growth and development of a country.

This was the unanimous agreement of economic and financial experts who were addressing a seminar titled ‘State of Pakistan’s Economy and Federal Budget 2014-15’, held at the Institute of Policy Studies, Islamabad.

The event, which was chaired by former federal secretary Masud Daher, with eminent economist Sakib Sherani as a keynote speaker, provided an in-depth analysis of the declining economic situation of Pakistan, the reasons behind this ironic state and the recommendations for a future to build upon.

In his presentation, Sherani stressed that the country needs urgent economic structural reforms, especially in the area of tax collection.

The former economic adviser of the ministry of finance, who based his presentation on macro-economic and fiscal contexts, lamented that Pakistan’s economy was operating far below its potential.

This is majorly because of inefficient tax mechanisms, due to which the tax revenues of the country have become stagnant and Federal Bureau of Revenue was able to capture a very small tax percentage of the total GDP growth.

He also criticised the prevailing tax culture in Pakistan, where in 2012, around 3.2 million qualifying citizens according to NADRA databases were not even existent in the tax registers, while around 61 per cent of the parliament reported no taxable income in their tax returns.

He opined that one budget cannot resolve all the problems, suggesting that the upcoming budget should be a part of a grand design, wherein the emphasis should be laid on higher tax coverage with lower tax rates. He concluded suggesting that the subsidies offered by the government should be supportive of investment rather than consumption.

Senior IPS associate Ameena Sohail saw weak institutional framework as the reason behind such low tax returns. She said that, additionally, the subsidy mechanism in Pakistan was also not very efficient as the rich unjustifiably enjoy equal percentage of subsidies as the people with low incomes.

Published in The Express Tribune, May 16^th, 2014.

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