LAHORE: The country's economy has reached a stage that will haunt the next elected government. Civil society must rise to the occasion and speak out against extravagant expenditures and non-transparent governance.
The businesses should cooperate with the government functionaries on irregularities committed by fellow businessmen that include tax evasion, under invoicing and smuggling.
The caretaker Commerce Minister Ejaz Gohar the other day blamed the businessmen for rampant under invoicing citing statistics from trade with China which showed letter of credit opened for $12 billion against Chinese documented exports of $22 billion to Pakistan.
It goes to the credit of the Chinese government that does not fudge its trade figures and include the amount of under invoicing paid to them by Pakistani businessmen in foreign exchange. And it goes to the discredit of the Pakistani government that has failed to stop this rampant under invoicing for the last 15 years.
The amount keeps increasing each year as the trade between the two countries increases. The Chinese figures alone tell us that tax is evaded on $10 billion imports from China. The products on which prices are lowered on imports generally carry a minimum duty of 15 percent or more.
This also results in dilution of sales tax impact on these imports. This means that on imports worth $10 billion the importers avoided $1.5 billion import duty. On top of that they avoided huge sales tax on duty paid value (17 percent sales tax is payable on invoice value plus the import duty paid). The total sales tax avoided $2.55 billion. The total revenue loss to the government of Pakistan from trade with China comes to $4.05 billion or Rs1.13 trillion.
There is an element of elite capture in almost all economies as the rich tend to get a larger share in the pie, still a small portion is left for commoners that keeps them floating. In Pakistan even in so-called documented trading the elite not only gets 100 percent share in the pie but also deprives the exchequer of a huge amount that if realized could have been used for the welfare of commoners.
Under invoicing from other economies has not been documented but cannot be ruled out. Bureaucracy is responsible for collecting actual import levies. The bureaucrats are brilliant in presentations but short of capability to implement them. Or they are not interested in plugging revenue leakages which are allowed on a rent.
They sit in their cozy offices and think of ways to maximize their rents. The honest businessmen that are rare in the country think that if anyone wants to fulfill his/her corporate social responsibility the government should be kept out of it. They warn that otherwise the bureaucracy would stall the program until they get their rent even from CSR activities.
Weak industry associations of the country have generally failed to put pressure on the government to resolve not only the industry specific issues; but also protect their unethical colleagues from any punitive action. Industry players having vested interests remain unsuccessful in putting right pressure on the government planners for providing a fair environment for running the industries.