Pakistan eyes 6 percent growth by 2018

ISLAMABAD: Haroon Akhtar, special assistant to the Prime Minister on revenue said on Wednesday the country, beset by low tax-to-GDP ratio, is expected to achieve growth rate of six percent before the next elections, due to introduction of pro-business policies.

“The business-friendly policies of the government have resulted in rapid economic development and the country will achieve growth rate of six percent by the elections (due 2018),” Akhtar told business leaders at the newly-constructed building of the Federation of Pakistan Chambers of Commerce and Industry in Islamabad. 

“Low tax-to-GDP ratio is hampering development for which we are trying best, while enhanced transparency has been ensured in the FBR (Federal Board of Revenue).” 

During the recent years, the country has seen its growth accelerate on support of a three-year bailout program by the International Monetary Fund. Still the government is struggling to increase narrow tax base, shrinking exports and key foreign direct investments.

The FBR collected Rs3,112 billion in taxes for the fiscal year ending June 30, 2016, registering a 20 percent increase over the previous fiscal.

Yet, the country’s tax-to-GDP ratio has stagnated at 10 percent over the last few years. A study said only tax evasion shears five percent from the tax-to-GDP ratio.

The government eyed growth rates at 5.7 percent for the current fiscal year of 2016/17 and seven percent for 2017/18. 

Pakistan’s economy achieved growth rate of 4.7 percent in 2015/16, the highest in the past eight years.

The World Bank, however, projected the country’s growth rate at 5.4 percent by 2018. Akhtar said a lot of incidents of tax evasion are being reported, “but, we opt for legal actions in a very few cases.” 

“Those who pay tax after detection face no action at all,” he added. “US is a super power because of a good tax system, while Europe is considered developed due to good taxation, therefore Pakistani business community should also discharge obligation so that Pakistan can develop at a fast pace.” 

He said a number of sectors, including fertiliser, have been given tax breaks, which has resulted in good growth.  “Lenders like Asian Development Bank is ready to provide loan on less than two percent, which indicates its confidence on Pakistan’s policies,” he said.

The PM’s assistant said the government has not transferred burden of improved oil prices to the masses. He said those who say that foreign debt would swell to $110 billion have overlooked certain facts. “GDP, investment and exports will also take a boost,” he added. “Debt-to-GDP ratio in Pakistan is at a comfortable level of 20 percent, while average interest payable on debt is three percent, which is not worrying.”