Pakistan Can Curb Rs 1 Trillion Tax Leakages via Policy Enforcement

Pakistan Can Curb Rs 1 Trillion Tax Leakages via Policy Enforcement

Karachi, March 29, 2024: In a bid to enhance the tax-to-GDP ratio and mitigate budget deficits, advocacy firm Mustehkam Pakistan highlights the urgency for Pakistan to address tax evasion and illicit trade, estimating losses exceeding Rs 1 trillion across key sectors.

Fawad Khan, spokesperson for the firm, emphasized the imperative need for policy enforcement to safeguard the interests of marginalized communities.

The extent of tax evasion and illicit trade in major sectors including real estate, tobacco, pharmaceuticals, tires and lubricants, and tea has resulted in significant financial losses for the nation, amounting to over Rs 1 trillion annually. Khan cited data from an international research report, indicating staggering figures such as Rs 500 billion in tax evasion from the real estate sector alone, followed by Rs 240 billion from tobacco, Rs 106 billion from tires and lubricants, Rs 65 billion from pharmaceuticals, and Rs 45 billion from the tea sector.

“The collection of this substantial amount is imperative,” Khan emphasized, pointing out the detrimental impact of these tax leaks coupled with illicit trade and ineffective policies, contributing to Pakistan’s dire economic situation.

Furthermore, Khan referenced a World Bank report critiquing Pakistan’s insufficient tax collection, falling short of meeting the country’s financial requirements. The report underlined the necessity for Pakistan to achieve a tax-to-GDP ratio of at least 15%, a target which currently stands at a meager 11.6%.

Highlighting the urgency of the situation, Khan stressed the need for Pakistan to increase its tax-to-GDP ratio, bolster fiscal tax collection, and clamp down on illicit trade across major sectors. Such measures, he argued, not only align with International Monetary Fund (IMF) targets but also facilitate the allocation of funds towards vital human development projects.

Pakistan’s Human Development Index (HDI) ranking has witnessed a significant decline in recent years, plummeting from 154th in 2020 to 161st currently. Khan emphasized that addressing tax evasion and illicit trade is paramount for sustaining economic stability, meeting international standards, and directing resources towards crucial human development initiatives.

In conclusion, Khan called upon the government to take decisive action in curbing illicit trade and tax evasion for the betterment of the nation. He underscored the critical role of policy enforcement in achieving economic stability and advancing human development in Pakistan.

As Pakistan grapples with economic challenges exacerbated by tax leaks and illicit trade, the urgency for decisive action becomes increasingly apparent, with the potential to not only bolster the nation’s financial health but also uplift its marginalized communities and propel sustainable development.