‘Tax evasion dents growth’

Islamabad:The failure to pay fair share of taxes not only deprives the national exchequer of vital revenue but also undermines Pakistan’s economic growth and development.

Pakistan faces several challenges in sustaining a stable and thriving economy. Among these challenges is the issue of tax avoidance by companies operating in the country’s tobacco industry, these views were expressed by some small traders, economy experts at a talk organised ahead of fiscal budget presentation.

The tax and economy experts of the views that the industry holds significant influence worldwide, with multinational corporations dominating the market. Pakistan, with its large population and significant consumer base (more than 25 percent of adult population are smokers), becomes an attractive market for these companies. However, the lack of effective regulations and oversight has allowed some international companies to exploit loopholes and engage in aggressive tax avoidance practices.When these companies manipulate their financial structures and employ complex cross-border transactions to minimise tax liabilities, they effectively evade paying the taxes that should contribute to the country’s revenue. This act of tax avoidance has far-reaching economic consequences for Pakistan.

The foremost impact of tax avoidance is the substantial loss of revenue for the Pakistani government. With limited financial resources, the government heavily relies on tax revenues to fund public services, infrastructure development, education, and healthcare. The shortfall in tax collections hampers the government’s ability to meet the needs of its citizens effectively.The loss of tax revenue from international tobacco companies contributes to Pakistan’s fiscal deficit. The government is then forced to bridge this gap by borrowing, which often leads to an increase in public debt. This situation further strains the economy, as servicing the debt becomes a priority, diverting funds from productive investments.