Daily Times

Fixing a support price didn’t work this year and targets of procurement were missed potentially. Government needs to improve per hector yield of crop so that supply of wheat may result in decrease in market price together with an increase in support price so that farmers may feel obliged to sow the same. Government on the other hand needs to trade-off between crop of sugar cane and cotton. Where cotton should be given priority as it will result in bringing cotton imports down. Pakistan requires around 13 Million bales of cotton for regular working of Textile units whereas production of 15 Million Bales per year will give us a carryover stock to deal following year uncertainty of climate. Recently, Pakistan imported 2.5 Million bales as production went down to 8.7 Million bales due to weather conditions, insect attack and polluted soil after sugarcane harvesting. Except calamities we can address rest of the matters to increase the yield. Not only these crops but other agricultural products, poultry, livestock and fisheries need a push factor as post corona world has more importance of availability of food where Pakistan can become not only self-reliant but can increase net foreign exchange.

Direct Taxation will reduce dependency on Indirect Taxation which resultantly can give power to government to reduce General Sales Tax (GST) and Withholding tax regime (WHT)

PBS data has revealed that import declined 2.12 percent only in dollar value terms showing a negative growth of $ 0.079 Million Dollars. Please note that this negative figure is due to government policies to reduce ever widening CAD amplified by coronavirus global shutdown. Now when there is minimum level of economic activity in country import showed such a small decline what if the activity starts. Definitely imports will go up and will ready to hit CAD again. As Pakistan’s economy from past several years has been converted into import-based economy therefore curbing imports hampered economic growth and Gross Domestic Product (GDP) witnessed decline from 5% in FY18 to 1.9% in FY20 and perhaps negative GDP growth rate due to COVID19 impact for FY21. These statistics reveal that government needs to give value to local manufacturers who are making import substitutions, mostly SMEs and LSMs on the basis of competitive advantage to export oriented manufacturers. Each government seems more interested towards exporters and bring export packages including low mark-up refinance schemes and affordable duty structures which is not fetching significant results. Government should clearly ask Multinational (MNC) LSMs to introduce production line rather assembly plants so that our related SME industry may grow with this technology transfer and we may save foreign exchange. Recently Government of Pakistan has given Construction sector as status of Industry and introduced incentives for the first time other than to exporters, in recent past. Furthermore, the government is keen in making IT sector as a good contributor in export and targeted to increase its export revenue from $1 Billion to $10 Billion Dollar by 2023. These are good steps towards making our economy grow and suitable alternatives to exports however again if input raw material will increase more imports then it can have a negative impact on CAD. Therefore, support the related industry having import substitute available which will net off the cost of import and generate entrepreneurship in Pakistan for better future ahead.

Reducing imports by increasing activity of agriculture and import substitution while increasing exports by adding more products to the list including agricultural products, CAD will be under control and inflation will be checked with satisfactory supplies resulting lowering Discount rate which means further reducing finance cost. However, to increase revenues to fuel expenditures and local debt repayments increase in tax collection is very important. Moreover, Direct Taxation will reduce dependency on Indirect Taxation which resultantly can give power to government to reduce General Sales Tax (GST) and Withholding tax regime (WHT). From Mr. Shabar Zaidi to present everyone under Federal Board of Revenue has tried to document the economy for increasing tax net. However, despite upfront efforts significant improvements have yet to be observed. Recently, FBR has abolished nine WHT in budget FY21 and a plan is on board to abolish more in the next fiscal year which is a good sign. In a report about FBR’s Tax Gap Analysis it shows that Agriculture Income Tax could have fetched Rs. 69 billion revenues on per annum basis if Rs50,000 was collected on per acre basis over certain limit of landholdings. It means strong agriculture sector can fetch more tax revenue if the sector comes under such taxation. Also, there is a need to conduct studies, whether the investment or economic activity has increased in a specific sector as a result of tax exemption or reduction in tax rate or it has only been done due to some kind of pressure. Specially now when we are in IMF program increase in tax revenues can help Pakistan to bear pressure from IMF to increase electricity tariff for revenue targets and unnecessary privatization of State-Owned Companies (SOEs). Tax exemptions to IPPs and projects related to China Pakistan Economic Corridor (CPEC) should also be audited however CPEC can be a trade off between cost and strategic benefits related to it.

The writer is an Economist, Columnist and a Chartered Banker UK. He can be found at twitter: syedaliimran75