Hurdles being faced in documenting Pakistan's economy - Part II.

Byline: Ahsan Nisar

In this article, sector specific and international trade hurdles will be discussed in detail:

2- Sector specific hurdles

1. Agricultural taxation

   Agricultural taxation is prone to outdated political system which is mainly dependent upon the feudal system. Every government is afraid of losing the massive vote bank of farmers by aggressive taxation reforms in the agriculture sector. Interestingly, subsistence level farmers are unable to comprehend that they will be exempt in any system of progressive taxation and are thus easily exploited by the feudalism.

   The whole agricultural process is effectively informal i.e. from the supply of raw material to the sale of agricultural produce in the market. The important role of middlemen in the shape of 'arthis' for provision of informal agricultural lending, supply of seeds/fertilizers and commissioning the ultimate sale of agricultural produce, hinders the documentation of the agricultural sector.

2. Challenges within the Trading Sector

   Trading sector consists of whole-sellers and retailers. As Pakistan is an import-oriented country, the trading sector (18.86 percent of GDP in 2018-19) has larger share in the national income than the manufacturing sector (13.04 percent of GDP in 2018-19). In spite of being the largest service sector of the country, majority of the traders, especially retailers, are not registered. According to FBR, among 4.0 million traders in Pakistan, only 10% actually pay the taxes.

   The fundamental problem with the trading sector is that it consists of millions of small-scale retailers who have both local as well as national unions. Tax reforms by the incumbent governments always face significant resistance by such associations in the form of shutter-down strikes across the country. A recent attempt by the government to document the small-scale retailers by putting a CNIC requirement for their procurement from tier - 1 retailers/wholesale dealers also resulted in traders' boycotts/strikes, pushing the government to its knees.

3. Timber - The Undocumented Natural Resource Trade

   Timber is a gigantic undocumented natural resource sector of Pakistan. In contrast to the world average of one-fourth geographical coverage of forests per country, only 4.6 percent of Pakistan's land consists of forests. This scarcity of forests and the UN demand of controls over deforestation resulted in prohibition of the logging of state-owned woods in Pakistan long ago. However, the...