News
Monday, May 02, 2011
Pakistan tax dodgers put economy in peril* Barely one percent of population pays at all
* Economists say less than 10 percent of GDP comes from tax revenue
ISLAMABAD: Pakistan is defying mounting Western pressure to end a giant tax dodge with fewer and fewer people contributing to government coffers, spelling dire consequences for a sagging economy.
Tax is taboo in Pakistan and barely one percent of the population pays at all.
Less than 10 percent of the gross domestic product (GDP) comes from tax revenue – one of the lowest global rates and worse than in much of Africa, economists say.
The Federal Board of Revenue (FBR) spokesman, Asrar Rauf, said, 1.9 million people paid tax in 2010, less than the year before, despite 3.2 million being registered to pay – itself a drop in the ocean of a population of 180 million.
As a result, Pakistan’s fiscal deficit widened from 5.3 percent to 6.3 percent of GDP in 2010, the Asian Development Bank said this month, knocking 2011 growth figures to 2.5 percent and predictions for 2012 to 3.2 percent.
In the wake of the catastrophic 2010 floods that cost the economy $10 billion, Washington donated hundreds of millions of dollars and demanded that Pakistan’s rich, whose lifestyles outstrip many in the West, step up to the plate.
This month visiting British Prime Minister, David Cameron, pressed the point home, saying aid increases were a hard sell when “too many of your richest people are getting away without paying much tax at all and that is not fair”.
Tax reform has come to nothing, not least because of political stalemate in the hamstrung parliament and a government coalition threatened with collapse by walkouts.
The IMF last May halted an $11.3 billion assistance package over a lack of progress on reforms, principally on tax.
And despite a flurry of meetings, no new loan has been agreed in the run-up to the IMF and World Bank’s spring meetings.
An IMF review mission is due to visit the country on May 8. “Consensus is building, we have almost reached agreement (on reform),” a government official said. afp
Courtesy www.dailytimes.com.pk