Take for example textiles. The total size of domestic textile industry is Rs 1200 bn. A 5 per cent sales tax on it should have given the government a Rs 50 bn in tax income however it is only receiving a paltry Rs 6 bn. Few days back when a body consisting of textile businessmen conducted a press conference the leader, Mr Motiwala, a seasoned businessman, at ICAP said that the total size of the industry to be at Rs 545 bn and mentioned the smuggling was one-fourth of the local market therefore justifying the tax. However, even at the suggested valuation of textile industry the tax should have been amounted to Rs 27 bn – still a long way what from what is given.
Coming to the bonds- prize bonds, along with real estate, is another safe haven for all those who earned their wealth through illegal means. The loopholes in our tax system and the absence of any documentation in prize bonds gave enough room for skulduggery to those who wish to hide their wealth. The total market valuation of these prize bonds stands at Rs 950 bn! More than 90 per cent of them are sold in Sindh. Such a billion dollar ‘industry’ (as it is considered) could not go unregistered and undocumented.
Let’s not forget the dollar. Up till now it was being held artificially low hence the so-called stability was illusory at its best and unsustainable at its worst. The IMF peddling its typical liberal economic model stressed on further devaluation and here we stand with a dollar being equal to Rs 160 (at the time of writing). The Fund wants free float system – something that could exacerbate the economic situation.
So saying that Imran Khan depreciated the Pak Rupee is factually incorrect. But yes the current administration can do something to stop the precipitous fall of PKR and they should. Pegging the exchange rate to what is called REER (Real Effective Exchange Rate) could be a good option with a target band of keeping it between ranges of 100 to 105. During Dar’s era the REER went north to 125 in June 2017 from an average of 104 in June 2013. Between 2013 and 2017 Rupee appreciated by a 22 per cent REER! Timely adjustments are acceptable than such sharp, steep falls that pinch.
Real estate was mired in same lacunas that were being exploited by the elite (political and business both). According to Mian Mannan Javaid, an advocate with more than 12 years of experience in corporate law and as a consultant shared some views with the writer. He said that almost more than 80 per cent of properties bought and sold in the past were done by what he calls the day traders.
“It is very easy for someone to buy a pilot and hide his money instead of keeping tens of millions at home”. Due to this day trading the property prices, as we all saw, sky rocketed. After the recent budget we can see the real estate market has come to grinding halt. He further added that we will see a drop of 30 to 35 in property prices in the days to come. But the good news is that we would also witness those with black money scurrying to save it.
Creative destruction, as historians have mentioned in many books and lectures, is unsavoury for those who have been taking advantage of the current “extractive system”. The government should, however, engage in dialogue with the business community and reach a common ground, for instance reducing the 17 percent sales tax to 10 percent, and giving some subsidy in terms of energy prices. But it should never step back from taking decisions, even though unpopular, that are better for the country in the longer run.