Reasonable consultations

LAHORE: One of the most frequent demands by Pakistan’s trade and industrial lobbies is that they be “consulted” before any major economic policy is formulated. On the surface, this sounds both reasonable and democratic.

But a closer look at the outcomes of such consultations reveals a familiar pattern: when given a platform, these groups often push for policies that protect their interests -- higher duties on competing imports, subsidies on utilities, and preferential treatment for exports. Rarely do they advocate for reforms that dismantle rent-seeking mechanisms or create a level playing field for new entrants and innovators.

What the state needs -- a growth-oriented, inclusive policy framework -- is often sidelined in favour of the demands of a few dominant actors. A truly pro-growth regime would break monopolies, reduce tariff walls and enable competition. But these are the very reforms that most existing players resist most.

Take subsidies, for example. Industry groups routinely demand subsidised electricity and gas, even as they lament circular debt and energy shortages. They want zero-rating for their exports but oppose expansion of the tax net, despite widespread under-invoicing and domestic tax evasion. In essence, they seek maximum concessions with minimal accountability.

Worse still, many in the business community resist rule of law when it comes to addressing economic crimes. Whether it is smuggling, under-reporting production, or suppressing sales, business associations often defend offenders under the guise of due process -- even when courts have authorised arrests based on credible evidence. In this worldview, fraud ceases to be a crime when committed by one of their own. This is not how successful economies function.

Pakistan must now decide: will it allow ‘consultation’ to remain a euphemism for protecting the status quo, or will it assert its sovereign responsibility to enforce fair competition and the rule of law?

If trade and industry truly wish to be partners in progress, they must support legal enforcement, not obstruct it. They must advocate for lower barriers to entry, not higher import duties. Above all, they must treat fraud as a crime -- not as a business strategy. Only then can Pakistan transition from a rent-seeking economy to a dynamic, rules-based one, as many of its regional peers have done.

India’s implementation of the goods and services tax (GST), for example, was met with a wave of fraudulent invoices aimed at illicitly claiming input tax credits. The government responded decisively. In 2020 alone, over 1,200 arrests were made following forensic audits, with coordinated action by the GST intelligence wing, enforcement directorate, and tax authorities. Even politically connected businesses were not spared.

In Malaysia, the Anti-Corruption Commission has regularly launched sting operations against customs officers and business owners involved in trade-related fraud. In 2023, a major crackdown exposed a syndicate of importers under-declaring goods, costing the exchequer RM3 billion. Arrests were made public, and dozens of business licences were suspended -- sending a clear message that fraud is a punishable offence.

Vietnam, another rising export hub, has also taken tax evasion seriously. In 2022, the General Department of Taxation uncovered more than 3,300 firms issuing fake VAT invoices. Hundreds of companies were shut down, and even mid-sized exporters were audited regularly, facing penalties ranging from back taxes and fines to prison terms.

These examples illustrate that economic progress and legal accountability go hand in hand. Businesses in these countries do not set the terms of enforcement. The state acts -- firmly, consistently and transparently.