Federal Minister for Economic Affairs Sardar Ayaz Sadiq has said that domestic industry and employment generation suffers while Pakistan’s dependency on foreign goods ultimately increases due to smuggling and this has been creating a never-ending vicious cycle.
Addressing the briefing session by IPSOS for parliamentarians regarding tax evasion in five sectors of Pakistan, Sadiq said that it is alarming to see huge tax evasion in five sectors, predominantly led by tax evasion in real estate and tobacco.
Estimates reveal that the total annualized tax potential of the tobacco industry in FY24 would be more than Rs. 500 billion but more than 50 percent of this is stolen by a very powerful illicit tobacco sector, he added.
The minister said that the decline in large-scale manufacturing has also been corroborated by the Pakistan Bureau of Statistics and will have a detrimental long-term impact on legitimate industry sustainability, employment, and exports. Real estate is an important sector but has its own disadvantages and we need to control the mushroom growth of housing societies on agricultural land.
The economy will start improving and we will be seen as a business-friendly nation once we work towards driving a level playing field for fair market competition. Tax harmonization is important for business growth, he further stated.
Adviser to the Prime Minister on Kashmir and Gilgit-Baltistan Affairs Qamar Zaman Kaira said that Pakistan is losing out Rs. 1 trillion in tax evasion every year and it can avoid foreign support if tax leakages are controlled through stringent enforcement of laws and bringing the black economy in tax net.
Kaira further mentioned that the highest tax evasion is in only two sectors, namely real estate, and tobacco, close to Rs. 750 billion. Illegal trade is not only a threat to legitimate businesses in the country, but also to the sovereignty of our country and the employment and livelihoods of our people.
Tax Evasion breakdown
IPSOS CEO Abdul Sattar Babar briefed the parliamentarians regarding the latest study on tax evasion in five sectors including real estate, tobacco, tyres and auto lubricants, pharmaceuticals, and tea has reached Rs. 956 billion. Estimated tax evasion in the real estate sector is Rs. 500 billion annually while the tax evasion in the tobacco sector is close to Rs. 240 billion.
Loss due to tax evasion in tyres and auto lubricants contributes Rs. 106 billion and pharma industry tax losses stand at Rs. 65 billion annually while Rs. 45 billion annual tax loss is recorded in the tea sector.
IPSOS report suggests that if tax evasion can be controlled then Pakistan can cover the total cost of the Public Sector Development Program (PSDP). This huge amount is also enough to fully finance Benazir Income Support Program (BISP). The report also indicates that by collecting this huge amount of tax by curbing evasion through stringent enforcement, Pakistan can enhance the federal education budget by 10 times.
Source: Pro Pakistani