Yes, I am not an economist, not even an accountant, but as a student of strategic studies, I think that this article may create a discussion among people who are responsible for managing Pakistan’s economic affairs and grappling with Pakistan’s economic woes for a long time.
Paper currency replaced gold in phases. For instance, after removing domestic gold convertibility in 1933, the United States formally eliminated the international gold standard in 1971. This officially transformed the US Dollar and global paper money into modern fiat, valued by social consensus rather than a physical commodity.”
However, the developed world found an alternate method of doing business with plastic cards, both debit and credit. For this purpose, the debit cards were introduced in the 1960s; however, these cards gained momentum in the 1970s and 1980s when the users realised that they could avoid visiting the bank branches and yet do their usual business. However, some of the developed states still have coins of smaller denominations, while encouraging people to use cards instead of cash.
Likewise, the credit cards were introduced by the Diners Club in the 1950s.
If Pakistan can do away with paper currency and shift to cards, both debit and credit, the government will have greater visibility of people’s spending and hence will be able to bring them into the tax net more easily.
While the paper currency has not been totally eliminated from the developed world, the use of credit and debit cards is more frequent and more favoured. In Pakistan, the credit cards were first introduced by Citibank in the late 1990s; however, it took more than a decade for these cards to gain acceptance at the retail stores, and cash continued as the favoured way of doing business.
The successive governments in Pakistan have struggled to find new taxpayers, but they have not succeeded in doing so because of the lack of transparency in the spending records of the populace. Hence, each government has relied upon increasing indirect taxes to collect the much-needed revenue to run the state affairs.
In my opinion, if Pakistan can do away with paper currency and shift to cards, both debit and credit, the government will have greater visibility of people’s spending and hence will be able to bring them into the tax net more easily.
Experts might argue that the literacy rate in Pakistan is low, and people may not be fully aware of the use of cards and may fall prey to cybercrimes. My take on this argument will be that the state may first launch a concerted campaign to create awareness among the people, give them the lead and gradually implement this policy. For instance, initially, any expenditure above Rs. 1,000 (One Thousand) must be on a card and not cash.
Also, to discourage carrying cash, the state may introduce coins of smaller denominations for minor expenditures, even though that must be discouraged.
In my opinion, the mandatory use of cards and coins will not only increase the much-needed taxpayers’ base but also act as a barrier to rampant corruption that exists in our society, where people have to pay for every service they deserve, but not without paying in the name of service charges. Experts might argue that these payments may continue through Easypaisa accounts, but in that case, too, the payer and payee will be known and can be taxed for their expenditure as well as income.
I understand that shifting from paper currency to cards and coins may not be easy and face a lot of resistance from the interest groups and even some political circles, but in the long run, common people will have more trust in the government. Also, when the tax net gets expanded, the government will not need to collect indirect taxes from the people, which will give them the much-needed relief.
The other benefits may include Pakistan’s standing on the global rankings about the reduction in corruption, the use of digital currency, and perhaps help in getting foreign direct investment due to transparency in doing business, because at the moment, Pakistan ranks 136 out of 182 countries on Transparency International’s Corruption Perceptions Index. The country scored 28 out of 100, indicating a high level of perceived public sector corruption.”
Another benefit could be reduced crime at the Automated Teller Machine (ATM) at the banks, where criminals wait for people to come to draw cash. This often results in casualties when the victim tries to resist the aggressors.
I understand that this proposal may not be new to economic experts and may be seen as a doable option, but it is worth discussing due to its benefits mentioned above. I think it is doable and may help Pakistan expand its tax base, reduce corruption, enhance transparency, and become a digital nation in the medium to long term.
The writer of this article has authored four international books: Nuclear Deterrence and Conflict Management Between India and Pakistan, South Asia Needs Hybrid Peace, Understanding Sun Tzu and the Art of Hybrid War, and Diplomacy and Deterrence.
The writer of this article has authored four international books: Nuclear Deterrence and Conflict Management Between India and Pakistan, South Asia Needs Hybrid Peace, Understanding Sun Tzu and the Art of Hybrid War, and Diplomacy and Deterrence.