Experts Urge Tax Restructuring to Reduce Borrowing From Friendly Countries

Clear, workable strategies for simplifying tax policies, preventing tax theft and evasion, targeted social protection schemes for vulnerable segments, import substitution for agricultural products, and revamping the country’s agricultural sector is crucial to prevent negative economic pressures at the micro-level.

This was the crux of a webinar on “Pakistan’s policy options to protect people from inflationary pressures” organized by the Sustainable Development Policy Institute.

Muhammad Ali Kemal, Chief SDGs, Ministry of Planning Development and Special Initiatives (MoPD&SI) stressed practical action points to manage inflation, governance failures, procurement expenditures, etc.

Addressing the supply-side pressures, he said that hoarding and profiteering stem from coordination failure and suggested an AI-based system at the district level to consolidate real-time data on perishable food items. He said that an AI-based system for food items can help in meeting the food demand internally and will reduce inflation.

Dr. Abid Qaiyum Suleri, Executive Director, SDPI in his opening remarks urged the government to issue a petrol card scheme for two and three-wheelers and cars under 800CC through data triangulation, and coordination between BISP, Ministries of Finance, Energy, etc. He further urged that the “government must plug loopholes in the energy sector particularly unaccounted losses from theft and transmission inefficiencies”.

He criticized cumulative governance and FBR’s failure in collecting retail tax revenue yet burdening consumers. Referring to food insecurity, he stressed import substitution for agricultural commodities as it imposes the second largest burden on import bills. He further said that “we must also think about converting cultivable barren lands across the country into fertile cultivatable lands and we need to join heads and hands with the private sector, government, and Armed Forces”.

He said that precision agriculture requires technical expertise in GIS, the Internet of Things, satellite imagery, and cybersecurity and the Armed forces can play a crucial role in these areas to increase agricultural productivity and food security.

Dr. Vaqar Ahmed, Joint Executive Director, SDPI said that government revenues, domestic production, and trade are impacted by tax policies and impact inflation in the country. He urged to “harmonize taxes through regular meetings of National Tax Council as tax cascading is causing higher prices in oil and gas, electricity, food, and consumer items”.

He stressed regional trade to mitigate food inflation during shortages and climate disasters. He stressed the dire need for tax restructuring to correct non-debt flows and reduce borrowing from friendly countries. For the long term, he stressed revisiting tax policies on provincial subjects like the transportation sector and transmission and their impact on inflation.

Dr. Aliya Hashmi Khan, former Dean of the Faculty of Social Sciences, Quaid-i-Azam University stressed reorientating PSDPs on social protection in addition to BISP to address food security and malnutrition in the country.

Considering alarming stagflation predictions for South Asia, she urged for employment guarantee schemes to protect people from inflation. She stressed that these schemes are crucial for informal labor considering exacerbating inflation and food insecurity as their wages do not conform with the government’s minimum wage standards.

Faad Waheed, Senior Vice President of the Islamabad Chamber of Commerce, and Industry emphasized import substitution and said that lack of attention to product development has prevented the country from becoming market competitive and increased export dependency. He said that the business sector’s import dependence on raw materials tilts the scales to foreign reserves moving out of the country as import payments.

He said that combined with rising inflation, the tax policies are further reducing the purchasing power of the consumers and slowing economic growth and measures to increase income is crucial in this scenario.

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