The real task of the government is to eliminate parallel economy which is equal to the documented economy of around $315 billion and the policy focus should be more on doubling the size of documented economy to over $1 trillion. It is not possible through temporary amnesty schemes rather it can be done through reforms in bureaucracy especially in the FBR, replacing it with an independent institution, setting it free from any influence of the government and political victimization, that can effectively enforce tax laws, strictly dealing with smuggling, custom duty evasion and black money with zero tolerance.

These views were expressed by the All Pakistan Business Forum Patron In-chief and Pakistan Freedom Movement Chairman Haroon Khawaja during an interaction session on ‘Current economic challenges and its way out & solutions’ with the National Board of APBF. The interaction session was held at the Iftar reception, which was also attended by the APBF Chairman Ibrahim Qureshi, President Syed Maaz Mahmood and general secretary Khurram Niaz.

Haroon Khawaja called for undertaking structural reforms of bureaucracy to make it efficient and responsive to the needs of time, as just good policies have little impact unless the institutions implementing them are effective and efficient.

He said our civil services system did not adapt to the changed circumstances, remaining frozen and unresponsive to the people’s needs and aspirations.

He said that the bureaucratic set up in Pakistan is an extension of the legacy of the Indian Civil Service, whose guiding principle was domination or exercise of authority and not service or performance of duty.

Replying to a query, the APBF visionary leader, who is also distinguished economist, observed that Pakistan’s narrow revenue base is fast becoming a monumental challenge as all successive governments have failed to increase both tax and non-tax revenue. As a result, the economy continues to suffer on all fronts.

On one side there is an internal problem of enhancing revenues that is struggling to be in double digit in terms of tax-to-GDP ratio. On the other hand, Foreign Direct Investment could face new problems if issues relating to terror financing and money laundering are not tackled properly.

The noted financial expert said that there is a distinct co-integration relationship between fiscal deficit and economic growth, in which fiscal deficit had harmful effects on economic growth.

He said amnesty schemes never worked in the past and without plugging the loopholes black economy will continue to appear, and the future government will continue bringing more such amnesty schemes.

He stated that Prime Minister had been talking about reforming national institutions but sadly those in his team do not appear prepared for the promised reforms. Resultantly, no change has been brought about in the bureaucratic structure of Pakistan so far.

He said that government has set revenue target of Rs.5.5 trillion in the forthcoming budget, which seemed unrealistic keeping in view the ground realities, urged the government to set realistic tax target in next budget that could be achievable and prove beneficial for the economy.

He said that tax target of Rs.4.39 trillion was set for fiscal year 2018-19, but during the first 11 months, FBR managed to collect only Rs.3.30 trillion showing a shortfall of around Rs.448 billion.

Quoting the FBR Chairman, he said that Shabbar Zaidi himself has admitted that current poor and flawed taxation system posed threats to the economy as it was the main cause of accumulation of untaxed wealth in the country.

He said the prevailing tax system was heavily relying on indirect taxes that put more burden on businesses and the common man.

Replying to a query, the APBF leader observed that despite devaluation of Pakistani rupee and government incentives to export sector, the country’s sale of goods to outside world declined by 11.13 percent in March 2019 to $1.97 billion.

He said that though Pakistani rupee has devalued by more than one-third since Dec 2017, but neither exports had shown a sizable growth nor imports had been contained.

Talking about the Amnesty Scheme, he observed that it was incentive package for tax evaders while previous government gave five amnesty schemes and now through 6th amnesty scheme revenue shortfall would not be managed, as there was nothing new in the scheme.

He said the government has increased the prices of petroleum products by up to 21.32 percent in last 4 months despite the fact that world crude oil rates are declining.

All Pakistan Business Forum chairman Ibrahim Qureshi, on this occasion, stressed the need to introduce reforms in the tax department, and purchase new equipment, besides implementing unique methods to enhance the tax net. The chairman concluded that instead of depending on foreign aid or loans, the government has to accelerate economic activities, enhance industrial production, finding new destinations for Pakistani merchandise as heavy debts have already hollowed the foundations of the country.

APBF president Syed Maaz Mahmood, addressing the meeting, recommended the broadening of tax base through appropriate legislation to ensure that all income earners pay taxes equitably, including on agriculture income.

Maaz Mahmood said that the challenge is not just to re-start the process of industrialization in the country, but to redraw the future industrial map in a way that places reliance on home grown industrial solutions in a competitive manner; encourages exports and promotes the SMEs- the real engine of growth and employment generation.