It is a big democratic step that the new government is ensuring absolute transparency in economic affairs by taking parliament in the loop before final decisions are taken. This marks a watershed in the political history of the country. In the past none of elected governments took the parliament into confidence in loan agreements with bilateral and multilateral sources.
The document of China Pakistan Economic Corridor, a project of $ 62 billion, was kept in secrecy by the last PML-N government despite its overselling for intended political ambitions. The agreement with Qatar for the Liquefied Natural Gas (LNG) was made a holy cow, raising question as to why India gets gas at $ 6 per mbtu and Pakistan is paying $ 11per mbtu to Qatar. The terms of the Free Trade Agreement (FTA) with China were neither put before the parliament nor shared with the trade bodies. Consequently, the concession of zero duty on 35 percent import tariff lines created a deficit of more than $ 10 billion in bilateral trade and closure of a number of domestic industries. It was because of these reasons that trade bodies and PTI law makers compelled the PML-N government to postpone the finalization of FTA phase-II, granting the concession of zero duty on 75 percent import tariff lines to save the domestic industry. Likewise, the terms of preferential trade agreement (PTA) with Indonesia are loaded against the business interest of Pakistan, causing a trade deficit of $ 1.7 billion.
Finance Minister, Asad Umar told Senate That Pakistan needs $ 9 billion to meet its external obligations and parliament will decide whether or not the government should approach the International Monetary Fund. “We are deliberating on various options. We will map out a plan over the next few days and will share it with the parliament,” the finance minister said. He made it clear that the decision in this regard would be made after taking the legislature into confidence.
The government is determined to effectively address the issues responsible for fiscal imbalances and the ones that brought Pakistan from the white list to grey list by the Financial Action Task Force (FATF). Home remittances will be fast tracked by issuing Sukuk Bonds to Pakistani Diaspora and Overseas Pakistanis Certificates. To plug the lope holes that facilitate money laundering, Hawala and Hundi business will be curbed.
Budget deficit will be brought down by significantly improving tax collection and exploring new sources of domestic revenue generation. It is pertinent to mention that the number of tax payer was 2. 4 million in President Musharraf era but dropped to 1.2 million in Nawaz Sharif government. In the 2017 alone 43 percent of listed companies and registered partnership firms did not file tax returns and slipped out of the tax net.
Tax collection has grown by 14 percent to Rs. 506 billion in the first two months of the current fiscal year. The government is exploring new avenues for additional revenue receipts to reduce the projected budget deficit to less than 5 percent of the GDP. The World Bank in its reports referred a number of times to the available data of potential tax payers with the Federal Board of Revenue. Former Prime Minister Shahid Khaqan Abbassi had announced to introduce CNIC based authentic tax profile but he ended up in another botched tax amnesty scheme on offshore amnesty scheme at a ridiculously low rate of 2 percent tax and 5 percent tax on undeclared domestic assets.
Provisional tax collection of July-August in FY 19 showed an increase of Rs. 62 billion over the same period last year. The tax collection in August alone increased to Rs. 250 billion, up by 5.5 percent over the same month last year. However, it is less than the monthly target of Rs. 281 billion. The tax payers who managed to get out of the tax net over the past 10 years need to be brought back in the tax net. The wealthy people who are willing to pay direct taxes but could not do so because of the rigidity of tax collection system can be persuaded to declare their income and pay taxes. A survey for the documentation of the economy failed in the year 2000 because of the arbitrary attitude of tax officials.