Pakistan loses Rs500 billion annually‘ due to tax exemptions’

Islamabad
A recent study has revealed that due to tax exemptions, Pakistan loses Rs500 billion annually which is 1.5 times the annual budget for education.
The study on ‘Multiple inequalities and policies to mitigate inequality traps in Pakistan’ jointly conducted by Dr Abid Aman Burki, Dr Rashid Memon and Dr Khalid Mir from Lahore University of Management Sciences (LUMS) in collaboration with Oxfam was launched by Sustainable Development Policy Institute.
Federal Minister for Commerce Khurram Dastagir was the chief guest. The report said that lack of tax revenues puts pressure on the budget and leads to inflationary monetary policies. Low tax base also implies that there is little room for investments in nutrition, public education and health, the study revealed.
The report said that Pakistan can get additional tax revenue of Rs80-115 billion, if the exemptions on agriculture are withdrawn. The study said that the inequality is due to lack of opportunities to access health care and education, unequal distribution and access to land and capital. Unjust policies including unfair taxation, low spending on social protection and services has increased inequality, it continued.
It revealed that the consumption share of the richest 20 per cent population in Pakistan was more than five times the share of poorest 20 per cent population in the year 2011-12. Similarly spending share of top 10 per cent of population was 31 per cent while poor 40 per cent of population’s spending share was only 20 per cent meaning 18 million richest people spend one and half time more than 72 million poor people.
In terms of intra-province inequality, according to the report, Sindh is the most unequal province in Pakistan with highest Gini index which means the divide between rich and poor in Sindh widened followed by Punjab, while Khyber Pakhtunkhwa and Baluchistan provinces had the lowest levels of inequality. The level of urban inequality is considerably higher than rural inequality which indicates that urban prosperity is not equally shared.
Speaking on the occasion, Khurram Dastagir lamented that media coverage is “crude” as coverage is there but reporting is somehow less. He said that the government is trying to pursue evidence-based research in framing national economic policy.
Talking about the under reporting of Pakistan’s economy, he said that in Pakistan, we do not have markets that come under the definition of economic market. Instead, we have large bazaars in which each day billions of rupees are transacted on a simple white paper without coming under taxation net. He said this is creating a fog and we cannot talk with clarity. He said it forces the government to increase direct taxes. The government has no framework or tools to enter into the bazaar economy to regulate it which is another hindrance in eradicating or narrowing inequality from Pakistan.
SDPI Executive Director Dr Abid Suleri said that sustainable development is impossible without social justice. He lamented that currently there are no equal opportunities but only opportunities where the rich get richer and the poor get poorer. He observed that social justice cannot prevail without bridging the gap between the haves and the have-nots. He also said that social justice should be provided impartially to all. He also insisted that the economy should be structured in way which ensures that the big fish are captured in the tax net to stop unchecked wealth accumulation.
Dr Abid Aman Burki said that poverty is under reported in Pakistan by the government surveys like Gini coefficient to estimate inequality. In the question hour, Jabbar Khan, Country Director, Oxfam-Pakistan said that 80 per cent of the rich did not amass the money through hard work or better strategies but by evading taxes.