KARACHI: Pakistan is heading towards economic collapse and immediate measures are needed to avert such a situation, said experts at a post-budget 2012/13 seminar organised by the Institute of Cost and Management Accountants of Pakistan (ICMAP) on Tuesday night.
“Pakistan registered the lowest GDP growth during the last four years,” said Asad Umar, former CEO and president of Engro (Pak) Limited. “Inflation has also registered sharp growth during the period,” he added.
Inconsistent government policies and security concerns hampered the investment flow in the country, as it came down to 12.5 percent from 22.5 percent during the last four years, he said, adding that the foreign direct investment also declined to less than $1 billion from $6 billion.
Umar, who recently joined Pakistan Tehreek-e-Insaaf, said the abysmal situation can be gauged through Pakistan’s per capita income, which will be doubled in 70 years, whereas in case of India it will take only 12 years.
He criticised the cost of the current expenditures as Rs1,000 billion has been spent under this head, while no addition was made in the development expenditures during the period under review.
Umar said that the debt-to-GDP ratio is not alarming, however, the interest payment is the main problem. Quoting figures, he said that three years ago the interest payment was 41 percent, which has now increased to 64 percent.
The fiscal deficit for FY12 will be around eight percent and estimation of this head for FY13 is fabricated.
Syed Shabbar Zaidi, leading tax expert and partner, A F Ferguson, Chartered Accountants, portrayed the similar picture of the economy, saying that the country is heading towards difficult economic situation. “Around Rs1.5 trillion debt burden is accumulating annually,” he said, adding that the total debt burden is around Rs12.5 trillion.
The government has provided power subsidies of Rs500 billion when electricity was available half a day. “It will be worst if subsidies are reduced or no addition to the national grid was made,” he added.
Zaidi said that the tax system should be equitable and all taxable income must be taxed. “Tax machinery is concentrated only on major cities for revenue collection purposes,” he added.
He identified that retailers and agriculture trading contributions are not paying their due income tax liabilities, while provincial governments are highly insufficient in tax collection, he added.
He suggested the government to bring down the sales tax rate to 10 percent, while approving the Finance Bill, 2012 in order to give relief to the masses and eliminate under-invoicing in the Afghan Transit Trade. The efforts of the Federal Board of Revenue (FBR) in total revenue collection during the current fiscal year are only 15 percent, while the remaining is the impact of inflation.
About the energy crisis, he said that it should be depoliticised. “People demanding electricity are not paying their taxes,” he added.
Shahid Hussain Jatoi, chief commissioner of the Large Taxpayers Unit, Karachi, expressed concerns over the present state of the economy. “In the past, not much has been done to boost the economy,” he admitted.
There are two options for the country either begging for more loans to foreign lending agencies or increase revenue collection at home, he said, adding that all the citizens, including politicians, bureaucrats and businessmen have the responsibility to contribute towards the national exchequer.
He advised the taxpayers not to give money as bribe to tax officials.
Ali Rahim, former president of the Karachi Tax Bar Association (KTBA), presented changes in the direct taxation through the Finance Bill, 2012.
The government should tax agriculture income by bringing middleman into the tax net, he said.
Adviser to the Sindh chief minister on investment and the former president of the Karachi Chamber of Commerce and Industry Muhammad Zubair Motiwala said that the budget projected a deficit of around Rs1 trillion, but fails to mention the strategy to bridge the gap.
Since going to the International Monetary Fund (IMF) during an election year would be a very unpopular move and the government should come up with a plan to deal with the mounting deficit.
Ashfaq Yousuf Tola, partner, Naveed Zafar Ashfaq Jafferi and Co. said that the government should bridge the tax gap, which is around Rs700-800 billion.
Anis-ur-Rehman, chairman of the Karachi Branch Council, ICMAP, said that the government had set an ambitious revenue target for FY12/13. He presented highlights of the budget and changes brought in through the Finance Bill, 2012.