Friday September 30, 2022

Debt trap haunts Pakistan’s future

By our correspondents
September 29, 2017

ISLAMABAD: The debt trap is badly hurting Pakistan and its future but there is no serious discussion on the issue in the government, parliament or among the political parties to devise a unified strategy against this serious emerging threat to country’s security.

Latest figures show that Pakistan’s internal and external debt and liabilities added during the present tenure of the PML-N government are more than what the country had borrowed during the initial 60 years of its independence i.e. from 1947 to 2007. The State Bank of Pakistan (SBP) statistics show a phenomenal rise in the country’s debt and liabilities during the last 10 years.

During the five years of the last PPP government, the total debt added was almost Rs9,000 billion. The PML-N government during its a little over four-year tenure has added further an almost Rs9,000 billion to the country’s debt.

The SBP figures relating to the total public debts and liabilities by end June 2013 were Rs16,228 billion, which by now (Sept 2017) has risen to Rs25,0621 billion.

Pakistan’s total debt and liabilities were Rs6,691 billion in 2007. Like the present government, these figures saw an unprecedented rise during the last PPP regime as the total debts and liabilities of those five years were more than double the total of such amounts accumulated during the first 60 years of Pakistan’s independence.

Although, the international financial institutions and rating agencies during the present government’s tenure reflected positively about the economic gains of the country, the phenomenal increase in the total debts and liabilities is really alarming.

Many believe that the Pakistani political leadership need to sit together to devise a unified economic policy besides showing zero tolerance against corruption. Similarly to improve revenues and avoid the country’s dependence of foreign aid and loan, politicians and parliamentarians would have to pay their taxes honestly so that the people should also follow them in this respect.

According to media reports, a recent study of the World Bank claimed Pakistan suffers a loss of Rs3.2 trillion annually due to weak administration and non-compliant taxpayers.In 2015, The News broke a major scam of tax evasion involving hundreds of billions of rupees and whitening of black money worth trillions of rupees taking place every year with the government authorities facilitating the extremely undervalued sales and purchases of thousands of residential and commercial properties throughout the country every day.

While Pakistan direly needs to broaden its tax base by making the rich to pay the tax, the federal and provincial authorities concerned were found graciously allowing the sale and purchase of properties, both commercial and residential, on extremely undervalued rates to the benefit of tax evaders.

This is a generally accepted practice of all the provincial registration offices as well as the CDA, DHA and other housing societies. Most of these sales and purchases are based on official rates, also known as DC (Deputy Commissioner) rates, which are far lower than the actual market prices of these properties.

This shady affair deprives the government of actual CVT (Capital Value Tax) and withholding tax, which if calculated on original price, goes into hundreds of billions of rupees every year. Such dealings, which have the blessings of the federal and provincial authorities, give great opportunity to tax evaders and black money holders to whiten their money by investing more but showing much less in real estate.

Following The News stories in 2015, the present government moved to slightly increase the DC rate but the initiative has been compromised following protests from property dealers and due to non-cooperation among political parties.