Bharat Rakshak

WASHINGTON: Pakistan supports a general sales tax and changes to its energy industry, the International Monetary Fund said on Saturday while reporting on its talks with the country.
The IMF and Pakistan also have agreed on a budget deficit target for the 2011 financial year to help flood victims and reduce inflation, said a statement issued by the IMF headquarters in Washington.
Adnan Mazarei, the leader of an IMF staff mission which held a series of meetings in Islamabad this week, praised the country’s efforts to stabilise its economy.Pakistani “authorities consider that the reformed general sales tax is essential to raise revenue to finance relief for flood victims, poverty reduction, and infrastructure reconstruction,” Mr Mazarei said. “Tax reform is also needed to make the tax system more equitable.”Mr Mazarei noted that Pakistani authorities recognised the critical importance of energy sector changes and had initiated reforms aimed at reducing loadshedding.Pakistani officials had agreed to “curtail energy subsidies in order to free up budget resources for spending in priority areas; and resolving the issue of circular debt,” he said.

The population of Pakistan has gone up to 184 million this year from 119 million in 1990, a report said. The latest report of the State Bank of Pakistan said the country’s population has increased to 184 million this year with an annual growth rate of more than two per cent, which makes up for more than 2.5 per cent of the world's population

^^^
saar why in strat fora, this should go to "Technology & Economic Forum "

During the previous fiscal year, the country imported goods and services valued at $31.52 billion, with the largest share going to oil products with $11 billion worth of imports – about 35 per cent of the entire bill. In contrast, the import of machinery and mechanical appliances (capital goods) was valued at only $3.96 billion, a little more than 12 per cent of all imports. If oil prices remain in the band between $80 and $90 per barrel, an optimistic assumption to begin with in the first place, our oil import bill for the current fiscal will fare somewhere between $12 and $13 billion.

The solution, no surprise, lies in increasing domestic oil and gas production. As of September 30 this year, the four listed oil and gas exploration companies are sitting with retained earnings of Rs222 billion and cash and short-term investments of Rs62 billion. If we want the other 11 unlisted and foreign owned companies to expand their exploration activities, then the lead needs to be taken by the Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Pakistan Oilfields (POL) and Mari Gas.

The government should give a target of at least 25 per cent growth in hydrocarbon reserves as well as production to these companies. If the companies are expected to do well, then we as a nation should be willing to incentivise their efforts. If they are successful in increasing reserves and production by 25 per cent, the government could offer them the carrot of a reduction in corporate tax rate, perhaps to the tune of five per cent.

The energy mix of Pakistan is no enigma. Primarily based on oil and gas to generate electricity, we simply do not utilise coal or focus on any other form of energy for power generation; and so, we have an alarming situation. There is over 40 per cent dependence on gas, while 30 per cent of all our power is acquired through oil. Majority of which, over 72 per cent is imported oil.

It is seen that coal is responsible for 72 per cent of China’s power needs, 56 per cent of Indian needs, where as the US utilises more than 50 per cent of coal in its power generation. Globally, the share of coal in power generation is 38 per cent, compared to 0.1 per cent in Pakistan.

A chemical analysis of the given coal reserves shows that not only it is a moderate-good quality lignite coal deposit, but has a lot of moisture in it, further benefiting the gasification process. Being a non-renewable energy reserve, we also have to consider the amount of coal present in these deposits. Studies show that the deposits are enough to meet the energy requirements of Pakistan for at least the next 200 years.

On February 8, 2008, the President of Pakistan gave a green signal to once again study and initiate the Thar Coal Project for power generation. For the said purpose, Thar Coal Mining Company was initiated to provide coal for the Independent Power Plants (IPPs). This positive step has received a green signal a number of times in the past, now only if we can take the first step.

BP has been producing on the Badin Concessions for more than twenty years, according to the company’s website. Badin 2, 2R and 3, which are in the country’s Sindh province. Other BP assets in Pakistan include an off-shore acreage for petroleum exploration, situated 250 km south of Karachi in ultra-deep waters. BP also has some oil and gas interests it acquired from the local Occidental Petroleum Corporation in 2007 and the Mirpurkhas Khipro (MKK) blocks. Earlier this year, BP appointed Citibank to sell its Pakistani assets as part of the larger disposal program to meet the liabilities following the Macondo spill.

Pakistan’s Oil and Gas Development Corporation Limited [OGDCL LN] is being advised by Barclays in bidding for BP’s Pakistani assets, a source close to OGDCL told mergermarket. OGDCL is evaluating the assets jointly with Pakistan Petroleum Limited (PPL), the source added. Although PPL and OGDCL are said to be working together, the groups have been approached by a Chinese player and a Gulf-region player, respectively, to talk about bidding as consortia. BP is said to seek a USD 690m price tag for the asset. OGDCL has made a more conservative estimate of USD 300m to USD 400m, the source said. The first source close to OGDCL claimed that OGDCL’s estimations might be based on the fact that some of the fields are in decline and might be worth less in the future.

The undeclared war for both India and Pakistan, at the start of their independent existence in August 1947, was to build the nation-state from the rubble of two hundred years of slavery and to better the quality of lives of their peoples. Various social and economic indicators in both countries cried for urgent attention. They both started with similar economic status, if not slightly better in the case of Pakistan. But, the political, economic and social costs of Pakistan’s overt and covert wars with India have damaged her irreparably. Pakistan has not only lost the race with India, which was not surprising and which should not have been attampted anyway in the first place, but also with other Islamic countries which were more or less at the same stage of development at the time of its independence, like Egypt or Malaysia or even other regional or Asian countries. Emma Xiaoqin Fan, Asian Development Bank wrote in her "Pakistan Public Debt: A Brief Overview" the following: Due to the inability to service external debt there were two consecutive rounds of debt rescheduling by Paris Club members and one from the quasi-London Club between 1998 and 2001. Pakistan had to seek exceptional financial arrangments from the International Monetary Fund in January 1999, after facing a severe balance of payments crisis. By circa 2007, Pakistan’s social and economic indicators had reached abysmal levels. In c. 2009, the forum of the ‘Friends of Pakistan’ consisting of aid donors to Pakistan, refused to give any more cash to a severely cash-strapped Pakistan, opting to route their funds only through the IMF for specific projects. The Kerry-Lugar-Berman Bill (PEACE Act) was also an outgrowth of similar concerns on the misuse of funds. Thus, Pakistan grossly underestimated or did not even pay attention to the ill-effects of its rivalry to match India, low-intensity proxy war in Kashmir and its support to terrorism, on its own economy and society, proving again how a shortsighted Pakistani tactical planning vis-à-vis India, undermines its overall strategic priorities in the end. In May, 2007, Pakistan’s renowned columnist Khaled Ahmed estimated the cost of the Pakistani support for the jihadi terrorism in Jammu & Kashmir as USD 2.6 Billion p.a. It is at least possible to estimate the economic costs of Pakistan’s perverse policies, but, incalculable has been its sociological damage, which has made the society become divided, sectarian, violent and fundamentalist.

The annual average GDP growth rate for India since 1980 has been around 5.6 % and is conservatively expected to be between 7 – 9 % for the rest of this decade, though Indian leaders are planning for a double digit growth for next two decades. At current rates of growth, Indian economy will dwarf Pakistan’s by twenty times by circa 2025. With more than 2% population growth (compared to India’s 1.2 %) during that period and a further deterioration in its political, economic and security situation due to its wrong policies and misplaced priorities, Pakistan can only be expected to perform worse than any optimistic predictions. In c. 2010, Pakistan’s Business Recorder newspaper estimated population growth between 3.1 to 3.3%. (Pakistan’s last census was in c. 1998 and no attempt at running a nationwide census has been made since then) One proof of Pakistan’s wrong priorities is that while India’s poverty has decreased from 45% in 1983 to 25% in 2002, that of Pakistan has gone up from 17% to 33% during the same time and by 2003 was estimated at 40%. The population growth of Pakistan during the Islamic regime of Gen. Zia-ul-Haq in the 80s was an unsustainable 3.5%. The per-capita income on Purchasing Power Parity (PPP) basis, which was equal between India and Pakistan in 1990 has gone up to USD 2820 for India while it is only USD 1860 for Pakistan, by 2003. The unceasing ambition to inflict damage on India both covertly and overtly and achieve an unattainable parity with India in military and political terms has spelled economic doom for Pakistan and the constant shadow of the armed forces in the governance of the state has only aggravated the situation. For example, during fiscal 1990, while Pakistan’s GDP was USD 40 Billion, it spent close to USD 3 Billion on defence, which is almost 8% of its GDP. It is suspected to be much more than that as most of the military spending was not directly accounted for under defence budget. In the period between circa 1970-2000, Pakistan’s defence expenditure varied between 4% and 9% with an average of 6% of GDP while that of India was between a minimum of 3% and a maximum of 4% with an average of 3.25%. After the devastating floods of August 2010, when over 20% of Pakistan’s land mass was reportedly flooded, the economy took a deep dive with the government being left with money for only two month’s worth of salaries for the government employees. And, yet, the budgeted 13.6% funds for the military continued unabated. In spite of such a huge expenditure for an impoverished nation, the asymmetry between the armed forces of Pakistan and its arch rival India have been worsening for Pakistan. Even as late as circa 2007 debt servicing and defence were eating up all revenues leaving not much for development, and this in spite of the fact that the US re-scheduled a lot of repayments, eased terms and conditions, doled out a lot of money and supplied military hardware at cheaper prices all in exchange for co-operation for the “war on terror”. For example, the US rescheduled Pakistan’s repayment of loans owed to the Paris Club (US $ 12.5 Billions) for 28 years after the 9/11 incident. The Asian Development Bank’s report in circa 2007 clearly spells out the huge defence outlay compared to other social sectors. Though the post 9/11 years saw a lot of investment into Pakistan from the Islamic countries of the Middle East due to fear of parking these funds in Western countries, they were mostly into capital accounts or speculative investments such as real estate rather than in manufacturing. However, the Prime Minister Shaukat Aziz continued to present a rosy picture of the economy until the democratic government headed by Yousuf Raza Gilani took over and held the Shaukat Aziz government responsible for ‘figure fudging’ and creating an ‘economic mess’. In fact, most Pakistani governments indulged in the practice of tampering with economic statistics to give a good account of themselves without worrying about the consequences.

By c. 2008, Pakistan was desperately in need of funds for meeting its balance of payments debts. Its external debts had increased to USD 55 Billion from USD 44 Billion a year ago. It had to go to the International Monetary Fund (IMF) for support and accept their stringent conditions. Pakistan got a loan of USD 7.6 Billion but was forced to control its soaring fiscal deficit, reduce its inflation, eliminate borrowing by the Government, free the stock and foreign exchange markets from Government interference, widen tax net, give autonomy to State Bank of Pakistan (SBP), reduce borrowings from SBP, reduce huge subsidies in power sector etc. Till late 2010, Pakistan was unable to impose GST (General Sales Tax) because of opposition, especially from the Sind. Pakistan was also asked to increase electricity charges by 35% especially at a time when power-cut for several hours was rampant throughout the country leading to rallies and protests. Unable to take the burden, the Pakistani Senate passed a unanimous resolution in September, 2010 asking international donors and lending agencies to write-off Pakistan’s entire debt burden.

The rulers of Pakistan did not themselves invest enough in education, health, and literacy, areas in which other countries of the Indian subcontinent including its youngest and poorest member, Bangladesh, far outstripped Pakistan. According to a World Bank report, Pakistan’s spending on education is only 2.3% of the Gross National Income (GNI) while the average across the other South Asian countries was 3.6%. This has shown up on the literacy rates in Pakistan. Roughly 46% of Pakistanis are illiterate and there has been a steady drop of enrollment in primary schools which now stands at 65%. On the other hand, a recent report by Goldman Sachs predicts India to be the third largest economy in the world by 2050. Even in human development, for example, India produces more than 5000 Ph.Ds per year from its educational institutions, apart from those who qualify from abroad, which is more than the entire stock of Pakistan’s. It is no wonder therefore that more than 100 of the Fortune-500 companies have setup R&D centres in India and more are on the way.

Determinants of income tax base in Pakistan: a policy review

The over all number of 'revenue yielding taxpayers' is around 750,000 as against 1.5 million taxpayers registered with the Income Tax Department, This includes 6,000 Corporate and 24,000-30,000 Registered Firms taxpayers. The individual taxpayers are around 720,000. Out of the later, 350,000 taxpayers derive income from business. Others arc salaried persons, rent-seekers, and partners/directors of firms/companies.

Pakistan scores the highest among South Asian nations in terms of doing business. In terms of business reforms, Pakistan made registering property more expensive by doubling the capital value tax to 4 per cent. It has reduced the time to export by improving electronic communication between the Karachi Port authorities and the private terminals. Starting a business was simplified by introducing a system that allows online registration for sales tax and removing the requirement to make a declaration of compliance on a stamped paper. It is ranked at 85th in terms of doing business, 38th in protecting investors and 67th in closing a business.

ISLAMABAD, Nov 08: Serious financial constraints and massive losses caused to the economy by the floods have hampered the development of the country’s infrastructure, instead pushing it backwards. More than 300 new development projects are presently awaiting approval of the Planning Commission but are not being considered for want of money.Upset with the situation, economic managers of the country are presently compelled to remain focused on the donor-funded projects or those schemes that would get international sponsors. Most of the ongoing development projects have already seen a major cut.

The CDWP, in its last meeting, cleared some big projects like the Rs113 billion Sindh government’s project for Sustainable Agriculture through Water Resources in Tail End Areas of Non-Perennial Canals in Sindh; another Sindh government’s Rs 17 billion project for dredging of two lakes and 14 canals in the province; Rs 17 billion project for dredging of River Indus at three barrages belonging to the Water and Power Ministry.he meeting approved Rs16 billion Sindh government project of Agroville Town in Deh Akro, Taluka Daur, District Shaheed Benazirabad. The projects, which have been cleared, are expected to come back to the CDWP for final approval.
Interestingly, the projects whose working papers were not provided and were promised later included Communication Ministry’s Rs216 billion project for upgrading of Jaglot-Skardu Road; Sindh government’s Rs113 billion project for Sustainable Agriculture through Water Resources in Tail End Areas of Non-Perennial Canals in Sindh; Sindh government’s Agroville Town in Dah Akro, Taluka Daur, District Shaheed Benazirabad; Sindh government’s Rs17 billion dredging of two lakes, 14 canals in Sindh; Water and Power Ministry’s Rs17 billion dredging of River Indus at three barrages; KPK government Rs2 billion project for Promotion of Primary Education for Girls; KPK government’s Rs2.9 billion Basic Education Improvement Programme; Information Technology Ministry’s Rs12.9 billion NTC-National Security Network project; Defence Ministry’s Rs1.6 billion project for the setting up of the National Canine Centre and others

I don't "object" to this thread but I believe that it may not help to give us the true picture of the Pakistani economy.

I am no economist, but at a basic "ground level" - i.e a farm laborer working in someone's land it is possible that the man gets paid only in terms of food and shelter. He earns a pittance - paid in Pakrupees - paid by a landowner who pays no taxes. The landowner gets free electricity and water - with the water, power and roads having been paid for by "aid money. Multiply this by 100 million and you get Pakistan. If there is a good harvest everyone gets a bit more though the landowner gets the most. He may sell part of his crop "unofficially" to some party at premium prices in exchange for goods or services that do not in any way get reflected in the national economy because of lack of tax and controls.

None of the above gets reflected in the economic indicators of Pakistan. It is entirely possible for a geographic area of land containing millions of people to contain lots of well fed and happy people with a very poor central economy. Only the later shows up in figures. The latter gets reflected only in terms of poor infrastructure and in loan repayments. Both those are being adjusted by 3.5 as "aid or "loan write offs". The scam actually exists at a very high level in the economies of the 3.5 who milk the funds of their own countries and channel it towards Pakistan where the money, having been diverted from the original country (the 3.5) can then be redistributed among a small group of wealthy Pakistanis, and bankers, bureaucrats and businesspeople from the 3.5.

A Pakistan economy watch will not, in my view, reveal anything more that 10% of the economic scam that Pakistan actually is. Pakistan can survive without an economy because of this scam. It is a fertile land that supports an agricultural economy that has no bearing on the national economy. The national economy is a scam being run by the Paki elite and army in cahoots with top level people in the 3.5.

I woud be happy to have this picture corrected or torn down by people who understand economics.

From the poorest of the poor to the wealthy elite, Pakistanis are feeling vulnerable and frightened. Some say the state of the economy scares them even more than the threat of terror attacks.

"You know, I can wake up any morning and say to myself, 'OK, God willing, I don't think a suicide bomber is going to find me or my family today,' " said Zeeshan Qadir, a merchant. "But I know for certain it is going to get harder that day to pay my bills."

Before, the people who saw me every day would give me enough rupees to buy bread," said a crippled beggar named Mangal, who seeks alms from motorists caught in traffic jams in Rawalpindi, adjacent to the capital, Islamabad. "Now they only give the smallest kind of coin and say, 'Sorry, brother. I don't have much to spare.' "

In attempting to weather the storm, Pakistan has some significant advantages, including a fairly diversified economy. Three million citizens working abroad send home about $6.5 billion in annual remittances.

"The good news is that no one, absolutely no one, wants Pakistan to fail financially -- we all recognize the dangers inherent in that kind of scenario," said a Western diplomat in Islamabad, speaking on condition of anonymity because he was not authorized to speak for his government.

"The bad news is that this is happening at a moment when we lack the level of ability to help that we had even a few weeks ago," the diplomat said.

Pakistan's textile sector, which accounts for 60 percent of the country's exports, is likely to be hit due to damage to the cotton crop, which could be 20 percent below usual, according to analysts.

“Large fields of cotton have been washed away by the floods,” said Ibrahim Mughal, analyst with Pakistan's independent Agri Forum organisation.

“We will be short of about three million bales, which will burden our already fragile economy by at least one billion dollars,” Mughal said.

AHORE: The cotton crop for the season 2010-11 is expected to increase at 11.5 million bales if favorable weather conditions continue and timely availability of all inputs including water to the major cotton growing non-perennial areas from Chashma Jhelum Link Canal. The calculation came unanimously at the Pakistan Cotton Forum (PCF)

Unscheduled gas and power load shedding across the country has forced the textile industry to suffer losses of Rs 1 billion per month, said Gohar Ijaz, Chairman of All Pakistan Textile Mills Association (Aptma), here on Monday. "Despite the government's decision of two days' gas load shedding for textile industry, it is resorting to 3 to 4 days' gas load shedding, negatively impacting the

Prices hit unprecedented highs in panic buying on cotton market
Prices hit the new, unprecedented highs on cotton market on Monday due to panic buying by mills and exporters, dealers said. The Karachi Cotton Association (KCA) raised spot rate by Rs 1100 to Rs 10,000. In ready business more than 35,000 bales of cotton changed hands in the price range of Rs 10000-10100.

Seeds cotton prices in Sindh and Punjab were at Rs 4300-4500, they said. In fact speculators are relating the situation with uncertainties about crop size and fast changing world cotton scene with the NY cotton market breaking price records every day was sending shock waves across the textile industry, some experts said. As a result of price hike, there is a rising fear under the circumstances the whole textile industry is in shock because it is feared that many textile units have stopped production to minimise their losses, they said. Nobody knows, when the prices will stop going up, they added.

15th Aug, 2007 10:44:01 AM

ARTICLE: The Chairman of Federal Board of Revenue (FBR), during the 14th National Tax Conference held in Islamabad on July 18, 2007, claimed that "direct tax collection has recorded a growth of 47 percent to Rs 330 billion during the fiscal year 2006-07 as against Rs 224.988 billion over the same period last year".

Official figures released on July 16, 2007 by the FBR showed direct tax collections at Rs 329.7 billion as against a revised revenue target of Rs 318 billion. However, the FBR has not revealed the actual quantum of income tax out of total collection of direct taxes (sic) at Rs 330 billion.

The FBR has not made public, the share of certain withholding taxes that constitute full and final liability in this "record collection" of direct taxes (sic). Obviously, the withholding collections that in pith and substance are indirect taxes should not be accounted towards direct taxes, even if collected under the garb of income tax.

It is shocking to note that out of total "income tax collection" for the fiscal year 2006-07; presumptive taxes are to the tune of nearly 32%. In other words the total collection of income tax as reduced by these taxes is not more than Rs 207 billion. Out of total collection of Rs 841.4 billion by FBR in FY2006-07, regressive taxes are to the tune of Rs 631 billion (after making adjustment of indirect taxes collected under the name of income tax!). The revenue deficit, despite record collection of Rs 841.4 billion, is monstrously high at Rs 200.5 billion and fiscal deficit, at Rs 373.5 billion.

In the face of this undeniable fact, the FBR in its advertisements in various newspapers is claiming that "taxpayers are partners in progress". One wonders what kind of progress the FBR is talking about. The real potential of tax collection for FY2006-07 was not less than Rs 1 .5 trillion.

The government failed to reach even the Rs one trillion mark by granting generous exemptions and concessions to the wealthy segments of society (exemption one head alone ie capital gains on stock markets was Rs 112.45 billion according to government's own admission at page 262 of Economic Survey 2006-07.

The FBR only extorts money from the weaker sections of society through exorbitant taxes [a poor man buying branded salt is paying 15% sales tax!]. It is now adding insult to injury by calling these victims of "fiscal highhandedness" as "partners in progress".

During the fiscal year 2006-07, the FBR taxed a poor widow who had placed funds received on the death of her husband, a government servant, at the rate of 10% (though her income of Rs 90,000 was below taxable limit). On the contrary, a mighty landowner who rented out his property in Islamabad at Rs 400,000 per month and had taxable net income of Rs 3,800,000 (after deducting allowable allowances and expenses) paid meagre tax of 5% on gross rent ie Rs 240,000, whereas his normal tax would have been Rs 950,000 (net annual saving in tax comes to Rs 710,000). This shows who the real "partners in progress" with FBR are.

Tax collected at source on goods and services/con-tracts/supplies/rent/interest income/stock market transactions etc, which being full and final discharge of liability is in substance indirect levies. If this collection is subtracted from income tax collection, the actual figure comes to around Rs 207 billion. Thus the share of income tax as percentage of total revenue is not more than 25%, whereas the same is claimed to be 31.7% at page 68 of Economic Survey of Pakistan 2006-2007 and according to Chairman FBR it is 39%. This exposes the so-called authenticity and reliability of official figures. Even the two wings of the government are claiming different figures.

If presumptive taxes on goods and services and many other transactions camouflaged as income tax are excluded from the collection of direct taxes, the share of indirect taxes touches 75 percent. It is pertinent to mention that the average share of direct taxes for high income countries is 46 percent while in the low income countries it is 28 percent. In 2006, Iran and India posted direct tax shares at 40 percent and 29 percent respectively as compared to 25% by Pakistan [Official claim of 31.7% by the Finance Divisions in Economic Survey 2006-07 and 39% by Secretary General Revenue Divisions is based on manoeuvring and manipulation of data].

The petite share of direct taxes in overall collection of taxes should be an immediate cause of concern for our policymakers. It is now well-established that there is a direct link between growing poverty in Pakistan and distortion in tax base since 1991, when a major shift was made by introducing presumptive taxes (indirect taxes in the garb of income tax). The lack of judicious balance between direct and indirect taxes has pushed an overwhelming majority of Pakistanis towards the poverty line.

The pathetic state of affairs in respect of tax-to-GDP ratio in Pakistan from 1990-2000 to 2006-07 is highlighted in Table A. The tax-to-GDP ratio of direct taxes is appallingly low. It may be noted that in these official figures huge amount of indirect taxes is shown under the head of income tax. The actual tax-to-GDP ratio of direct taxes for FY 2006-07 after excluding presumptive taxes will be around 2.4%, whereas officially it is projected at 3.02%.

The net amount of income tax collected for financial year 2006-07, according to FBR, is Rs 3 09,653 million. If we subtract tax collected at source on goods and services/contracts/supplies at Rs 55,862 million, on imports at Rs 26,l 02 million, exports at Rs 10,827 million, on rent at Rs 647 million, interest at Rs 3717 million, petroleum products at Rs 758 million, commission income of advertising agent and others including stock exchange brokers at Rs 4472 million, on goods transport vehicles at Rs 536 million, which being full and final discharge is in substance indirect levy, the actual income tax collection comes to Rs 207 billion.

In fact the collection of direct taxes as percentage of total revenue is only 24.6% and not 39% as claimed by Chief of FBR. What makes the situation more painful is the fact that Income Tax Department collected only Rs 1100 million out of current and arrears demand during FY2006-07. In other words the tax collected with own efforts is just 0.35 % of total collection! In the face of this reality what is the justification to have a large income tax establishment, when this kind of collection is possible with a small number of staff, not more than 10 to 15. It is really a scandalous state of affairs.

After adjustment narrated above, direct tax-to-GDP ratio for 2006-07 is dismally low at 2.4% and not 3.02% as claimed by the FBR. It proves beyond any doubt that the tax system is directly contributing to growing poverty as people who possess enormous income and wealth are not being subjected to income taxation in Pakistan and poor people are subjected to heavy taxation eg 15% sales tax. Thus the very purpose of redistribution of wealth as the main object of taxation is being defeated.

It is pertinent to mention that in 2006 the government of Sweden collected taxes at 50% of GDP, almost twice as high as the total tax revenue of America and Japan, with both collecting around 25% of GDP. In the European Union, tax revenue, on average, reaches 40% of GDP. We have a dismally low tax-to-GDP ratio and according to FBR will have to wait for 20 years more to come up to the level of many developing countries [see Table B]. This is indeed a sorry state of affairs.

15th Sep, 2010 11:58:57 AM
KARACHI: The business community has expressed reservations over the imposition of a new tax on big houses as suggested by the President Asif Zardari in a recent meeting with the representatives of trade bodies, said S M Muneer, president, Pak-India Chamber of Commerce and Industry in a statement on Tuesday.

Speaking at a dinner hosted in honour of outgoing Administrator, DHA, Brig. Khalid Masood Tirmizi and incoming President, Clifton Cantonment Board, Brig. Anis Ahmed at a local hotel, Muneer said that following sheer objection by the business community to impose Flood Relief Tax, Zardari suggested to impose house tax on houses measuring more than 1,000 square yards{i.e. collect property tax on houses that are more than 9000 Sq Ft} to raise Rs8 billion for flood victims.

The representatives of trade bodies in that meeting had opposed the levy of house tax because many pensioners and old people live in and live on the rent from some of these houses.

He said that firm measures would have to be taken by the government to rehabilitate the flood victims and revive the economy. He strongly opposed to go into the shackles of IMF and World Bank once again. “We have to pay $8 billion as debt servicing next year and I ask government where this amount will come from.”

He advised the government to stick to seek loans write-off, waiver of interest, and re-scheduling of previous loans. He further advised the government to minimize the non-developmental expenditures, withdraw massive perks and privileges to ministers, assembly, and government officers etc to raise funds for rehabilitation of the IDPs.
...
End.

7th Oct, 2010 13:47:45 PM
ISLAMABAD: The outfit entrusted with the responsibility of generating billions in revenues has instead aided over 150 individuals in shying away from payments of around Rs21.7 billion in tax obligations by allowing the use of techniques such as fake losses, calculation errors, unlawful depreciation losses and reduced tax rates for the ‘blue-eyed’.

The office of the Auditor General of Pakistan has found 153 cases where the Federal Board of Revenue (FBR) facilitated tax evasion – mainly through short assessments of tax liabilities.

About one-fifth of the amount was evaded by 38 individuals hailing from Karachi, who managed to avoid payments worth Rs17.7 billion – a figure higher than the country’s education budget for this year. The discrepancies were pointed out during the audit of the accounts of 2008-09.

The evasion was carried out through fake losses brought forward, calculation errors in computing income liable for taxation, excluding taxpayers from the minimum chargeable amount, unlawful depreciation allowance for buildings, plants, machinery and cars, exempting the income earned from interest, reducing the tax rate for 25 hand-picked taxpayers and allowing excess tax credit.

Another Rs12 billon was forgone ‘due to the negligence of the authorities and by not invoking the relevant rules for tax recovery’, note the official documents.

Meanwhile, those who accurately file returns are made to pay for the sins of the FBR and the few hundred tax dodgers. Instead of increasing the tax base and plugging in the leakages, the authorities are burdening existing taxpayers by increasing rates and levying more charges.

According to one estimate, annual tax evasion is estimated at Rs796 billion, Rs111 billion more than the budget deficit target for this year.

The top auditor’s office has revealed that the FBR permitted an excess depreciation allowance near Rs4.3 billion on account of buildings, plants, machinery and cars in 17 cases. The main beneficiaries hailed from Karachi where eight taxpayers got an undue favour of Rs2.5 billion. In 13 cases, taxpayers were allowed to slip away with Rs1.3 billion by not charging them on account of income from business, unauthorised expenditures adjustment from the chargeable income. Two such cases were reported from the Large Taxpayer Unit in Lahore, one each from the Regional Tax Offices at Abbottabad and Islamabad and seven cases involving Rs984.3 million from Karachi.

In nine cases, taxpayers incorrectly carried forward losses to set them off against the profit of the next year to evade Rs350.8 million in income taxes.

In 31 cases the FBR supposedly made computing errors while calculating the income that caused a loss of Rs1.8 billion. Three such cases were detected in Lahore that caused a loss of Rs1.5 billion.

In 15 cases the authorities did not levy the minimum payable tax or levied less than the required tax that caused a loss of Rs1.2 billion. As many as seven such favours were extended in Islamabad, four in Quetta, two in Hyderabad and one in Lahore.

Excess tax credit to the tune of Rs 475 million were allowed in 16 cases of which a sizeable portion of Rs313 million owed to three taxpayers from Karachi.
End.

Modern societies need more than food and basic shelter. Decentralized black economy will indicate only a slight improvement from official statistics because black money doesn't circulate as well as white. Having foreign baksheesh will alleviate a little but so will printing press. But I doubt if 3.5 can support 180 million people.
A Pakistan economy watch will reveal the dynamic portion of the economy and we can assume the Black economy is a constant in the equation.

Importantly, some commentators have gone further and said that what is more incredulous is the basis on which the new growth figures have been revised. The 15 per cent growth shown in the construction sector, when the public sector development programme and government spending have been substantially reduced this fiscal year, has even been questioned by some government spokesmen who have, nevertheless, defended the new GDP growth figures.

Looking at all the factors which have affected Pakistan’s economy over the last two years — and I have listed just a small handful — suggests that there is no way Pakistan’s economy could have made such a miraculous turnaround. If so, as Pakistan’s economic managers claim that we have, we must be grateful to them for they have defied the very logic of economic management and they need to document their achievements so that others can learn.

you know shiv - your model above corresponds quite well to the apartheid era south african economy
world class ultra modern amenities and infrastructure for 2-3m and full-on 3rd world for 30m
replace feudals with white farmers and landowners and the rest pretty much fits

Ah an excellent example that I did not think of. You can hurt the Pakistani economy as much as you like but the core establishment will survive and be wealthy and powerful. That is Pakistan's strength. That is why the Paki elite mock people who say that Pakistan is about to collapse.

However that does not mean they are not in trouble. Ultimately a runaway increase in population will begin to bite. The US, or China cannot support 180 million people . But they certainly can support 1 million who matter (and their families) and there is enough money and Pakistan's feudal structure ensures the wealth of at least 30-40 million people. Calculating Pakistan "economy" on the basis of indicators that we usually see gives us little indication of Pakistan's real staying power. The news of the Pakistan economy has been so bad for so long that the state should have collapsed. But it hasn't. It only means that the model we are using to describe what an economy needs must be flawed and we may be looking at some western model which is inapplicable here.

Like China, Pakistan hides or does not measure many indicators, and Pakis lie on other indicators. But my belief is that a comparative study of the economy and infrastructure in Baluchistan and NWFP versus Pakjab and Sindh may give a better indicator of where things may be spinning out of control. As always "economy" needs to translate on the ground to infrastructure, healthcare, education and industry. Regional differences in these parameters may indicate where the money is going and who is benefiting from the little wealth there is.

JMT

LAHORE: Stuck in a financial quagmire, the federal government declined to provide money to the Trading Corporation in June for importing sugar.According to sources in the finance ministry, the TCP came up with a schedule to open letters of credit (LCs) to line up 525,000 tons of sugar imports for October and November, which were predicted to be crucial months.The corporation pleaded that it had exhausted its Rs110 billion credit line with banks and was short of money to open LCs for imports, as ordered by the government. However, the finance ministry refused the money point blank, the sources said.At that time, the international price was around 18 cents per pound which has now risen to a staggering 33 cents. The import would not have cost more than Rs55 per kilogramme, but now it is Rs90.

ANALYSIS OF PAKISTANI INDUSTRY
FINAL
REPORT
PRESENT SITUATION OF CAR INDUSTRY:

Locally produced cars have taken an unexpected drastic downturn to the extent of frustrating all future growth prospects and projections. According to the current figures, in due comparison with the figures of last year for September to December period, the sales of cars has gone down by 15 percent. As a result the production has also gone down culminating with its impact on supply schedule; both import and local. This downturn has come at a crucial time as most of the manufacturing had just increased their investment in the expansion projects and vending industry had made equally huge investment to complement the capacity expansion exercise. The local vendors have now to face the curtailed orders, which may most hit the smaller ones with closures. All this obviously has also adversely impacted the government revenues in substantial terms. The government has suffered a revenue loss of Rs. One billion (9%) when September to December data is compared with last year.