Lahore: Former Chairman Federal Board of Revenue, Shabbar Zaidi has described illegal trade as a major threat to the country’s economy and stressed the need of documentation to address it.
Addressing a webinar on Illegal Economy Tax Net, Shabbar Zaidi said that all state institutions in Pakistan, including, government, judiciary and intelligence and others, are keen to document the economy. “But Pakistan’s own businessmen are reluctant to documentation”.
“There is a public perception that as chairman of the FBR, I faced more resistance from the government or the bureaucracy. The fact is that the biggest resistance came from the business community,” said Zaidi.
He termed the opposition to documenting the economy by the business community in Pakistan as short-sighted and limited thinking, while adding, “Due to this limited thinking, we could not compete in the face of growing regional trade and this trend is affecting Pakistan’s major trade associations and chambers”.
He revealed that cigarettes are on top of the list of undeclared and unregistered products sold. More than 30% of cigarettes sold in the country are unregistered and non-declared which is an important source of tax evasion.
He said that in order to curb the illegal sale of cigarettes and tax evasion, he tried to implement a track and trace system in which he could not succeed.
The former chairman of the FBR identified cigarettes, packaged spices including sugar, batteries, electronic products, motorcycles, bicycles, cement and consumer goods as products whose actual production and sales far exceed than indicated production. These non-documented products have become a major source of tax evasion in the country.
He said that Pakistan could not develop its economy on a sustainable basis without documenting it. Organized business has been made difficult in Pakistan. On the contrary, supportive policies have been formulated to promote individual business.
In Pakistan, there is a huge tax on doing business in the form of a company, while individual traders are not being asked. The company cannot open a foreign currency account while there are no restrictions on opening an individual account. These are the policies through which these organized businesses were deliberately discouraged.
He said that one of the major reasons for illegal trade in Pakistan is the high tax rate. For instance, 74% tax is levied on a pack of cigarettes in Pakistan. Such a high tax rate on cigarettes is a major reason for tax evasion because a business mindset is always interested in trading high tax products and making a profit.
He said that the business community in Pakistan sees the documentation of the economy only in the realm of taxes and is not willing to document the economy or declare their business. This is detrimental to the business community itself and businesses in Pakistan.
The former FBR chairman said that illegal trade, tax evasion and undocumented economy were closely linked to Pakistan’s politics. After the time of General Zia-ul-Haq, a mafia emerged in Pakistan with the aim of blocking the path of documenting economy in Pakistan.
He revealed that the mafia is behind the undocumented economy and at the moment $150 billion assets of these businessmen are parked abroad from Pakistan and whenever there is an attempt to document Pakistan, these individuals become obstacles in its path.
He said that the policy of promoting these un-organized businesses in Pakistan is also reflected in the fact that no politician other than a politician has registered any company of his business group.
Linking illegal trade, tax evasion and undocumented economy to politics, Zaidi said that these elements invest money in elections, sponsor big rallies and reap benefits after their parties come to power.