According to the international research institute Ipsos, Pakistan’s pace of socio-economic development can be significantly enhanced by reducing the loss to the national exchequer through the curbing of illicit trade.
Pakistan’s ranking in the Human Development Index of the United Nations Development Program (UNDP) has steadily declined in recent years, with the country presently ranking 161 out of 192 states in 2022.
The report highlights that substantial investments can be directed towards providing essential services to the people and developing infrastructure, all while minimizing the damage inflicted upon the national exchequer by illicit trade. According to the report, tax evasion to the tune of Rs 956 billion occurs annually in five sectors within Pakistan. These sectors encompass illicit trade in tires and lubricants, cigarettes, real estate, and tea.
Illicit trade in tires and lubricants contributes Rs 106 billion annually to the national exchequer, while Rs 240 billion is generated annually from the illegal sale of cigarettes. The real estate sector contributes Rs 500 billion to this tax evasion, Rs 65 billion arises from the illegal sale of medicines, and the illegal sale of tea results in an annual deficit of Rs 45 billion to the national exchequer.
Experts suggest that Pakistan can bolster its position in the Human Development Index by focusing on public health, education, clean drinking water, and infrastructure, and by preventing the loss of billions of rupees annually due to tax evasion through illicit trade. The significant evaded amount of Rs 956 billion from these five sectors could be allocated as a development budget for the financial year 2023-24. By saving this amount, Pakistan could increase its education budget and fully finance the government’s social welfare program, the “Benazir Income Support Program.”
The report also reveals that by curbing tax evasion in these five sectors, Pakistan could install 391 water filter plants in each of the 400 tehsils, providing clean drinking water to 80% of the country’s population. Furthermore, this effort could fund the construction of 1700 kilometers of motorways in Pakistan every year or provide homes for 67,000 homeless individuals annually.
In light of these findings, experts stress that the biggest challenge lies in increasing the government’s resources to provide relief to the people amidst rising inflation. Simultaneously, the escalating debt burden is exacerbating the situation. To address these challenges, the government must enhance its financial resources. This can be achieved by implementing technology-based solutions and laws that enhance the capacity of the Federal Board of Revenue (FBR) to support social development in both the short and long term.
