LAHORE:
As much as 60% of Pakistan’s total tax revenue comes from a single sector – the large-scale manufacturing (LSM), which highlights the imbalance in the tax system. The burden on this single sector is four times higher than the rest of the economy, leaving it struggling to breathe and as a result, the manufacturing industry is on the decline rather than showing growth each year.
These remarks were made by former federal finance minister Dr Hafiz A Pasha during a speech at the Lahore Chamber of Commerce & Industry (LCCI).
Pasha noted that Pakistan had several sectors with high income potential, such as agriculture, yet the tax revenue from those sectors remained minimal. Only 1% of landowners possess 22% of the best agricultural land, but the revenue collected from the agriculture sector is negligible.
Following IMF directives, the government has estimated just Rs4 billion in tax collection from the agriculture sector next year, extremely low compared to Rs4,500 billion collected from the manufacturing sector.
He added that investment in Pakistan had sharply declined. “Today, investment in large-scale manufacturing is much lower than it was 25 years ago. The biggest concern is that the depreciating capital stock is not being replenished, which hampers sustainable growth of the manufacturing sector.”
Pasha emphasised that the export sector and LSM were the backbone of Pakistan’s economy, whereas real estate – a non-productive sector – continued to attract the highest investment. He added that revenue collection from property was just 0.2%, which was 12 times lower than that from the industrial sector.
He warned that Pakistan currently had 2.1 million unemployed youth, 2.6 million children out of school and 22% of the workforce without employment – the highest unemployment rate in the country’s history. Additionally, only 6% of bank credit is available for three million small units, while 80% is provided to the government.
Speaking on the occasion, LCCI President Faheemur Rehman Saigol said that Pakistan had not properly utilised its economic potential. “The challenges the country faces today are not caused by external factors but by poor policies and governance,” he said.