Daily Times

There are issues with Pakistan’s economy and how it is managed. The rich are getting richer while the poor, poorer. There is something very flawed.

To assert this point, one can take an example of Pakistan’s auto sector. Auto companies are launching SUVs one after another while sales are also reported to be in high numbers. On the other hand, low-end Chinese motorcycles, which is the cheapest mode of transport in the country, are also being sold in big numbers.

It shows that a major chunk of the population can afford only Rs50,000 motorcycles while there’s another segment who can afford Rs9 million SUV. The gap between the rich and the poor is rising.

The government must play a role here. But it seems it has been facilitating this to happen. It gives subsidies to big industries such as the sugar industry, which has now become a pain-in-the-neck, when it should have been doing something concrete for the underprivileged segment.

One of the most important parts of the economy, the collection of taxes is also rotten to the core. When the government must be taxing those, who have been earning more, it takes the easy way out to tax the essentials such as food items and other groceries.

Sometimes a huge portion of some industries are completely overlooked.

For instance, Pakistan’s tobacco industry is marred with illegal trade of cigarettes. According to an estimate the illegal trade of cigarettes has reached 50% of the total industry. They pay negligible taxes.

The illegal cigarette manufacturers don’t only evade taxes but they also sell low-quality cigarettes in the market, which are more dangerous to the health of the people as compared to their legitimate counterparts. Apart from not following health guidelines, they also don’t follow marketing guidelines set by the government authorities for the industry.

By evading tax, ignoring marketing restrictions put in place by the government and lesser health standards to follow, they become competitively advantaged against industry players, who pay tax, observe marketing restrictions and follow health guidelines. They can sell low-priced cigarettes as they don’t follow government restriction of not selling a cigarette pack below Rs63.

By letting illegal trade of cigarettes to thrive, the government is doing a disservice not only to the tax-paying cigarette companies but also to the nation.

Moreover, the existence of such industries in the country also raises eyebrows of international monitoring agencies such as the Financial Action Task Force (FATF), which the country has been struggling to convince to take it out of its grey list. It has great economic implications when it comes to international trade. Where such big illegal trades thrive, money-laundering and also terror-financing can also be expected.

The government needs to closely scrutinize industries such as tobacco and just not sweep it under the carpet for its own convenience as reports have emerged that political figures patronize such illegal businesses.

These issues snowball into a larger crisis, which the country has been witnessing more prominently in recent times. It needs to restrict money accumulating in a few pockets and that too through illegal means which the country is witnessing in the tobacco industry.

These things especially the illegal trade and manufacturing distorts the economy so much so that its consequences are not only observed in the country but it also brings bad name to the country internationally as such illegal businesses breed ground for money-laundering and terror-financing.

According to reports, the illegal tobacco business is depriving the exchequer of Rs50 billion every year. This is just an estimate of evasion of taxes, not the size of overall illegal trade, which would certainly be multiple times bigger than the amount of taxes they were supposed to pay.

Such tax-evading businesses and industries facilitate the vicious circle where rich become richer and poor, poorer. Such illegal businesses not only save on taxes, they also save money by not following health standards. They are able to sell big quantities because the cost to produce a cigarette is low since tax and standards were not followed.

The government and the Federal Board of Revenue (FBR) should bring such businesses, industries and individuals under the tax net to straighten the economy and reduce the gap between the rich and the poor.

The writer is a freelance journalist with an interest on the economy