The abolition of wealth tax and other tax concessions have caused a huge loss of Rs 300 billion to the exchequer, said Dr Hafiz A Pasha, former provincial minister and a former deputy chairman of the Planning Commission. Speaking at a launching ceremony of the first-ever annual report of Institute of Public Policy of Beaconhouse National University here on Monday.
The surge in oil price in the international market is not primarily the cause of economic deterioration. There are internal erosions and these are overwhelmingly responsible for the present crisis, he added.
A team of eminent economists including former finance minister Sartaj Aziz, vice chancellor Beaconhouse National University, Chairman of the Institute of Public Policy Shahid Javed Burki, Dr Hafiz A Pasha, Dr Parvez Hassan, Dr Akmal Hussain and Dr Aisha Ghous Pasha have prepared the report.
According to the report, Pakistan's economy is once again at a critical juncture. After a period of strong economic expansion, relative macroeconomic stability, and increased foreign investor confidence, over the years 2003-2006, the country is facing very serious economic strains and social challenges.
The report titled "State of Economy: Challenges and Opportunities" strongly advocated the imposition of wealth tax, expansion of safety net for the poor by allocating at least Rs 50 billion to minimise the impact of rise in food prices, diversification of exports base, levying capital gain tax, extension of general sales tax to services sector, imposition of regulatory duty on import of items other than fertilisers and petroleum products and extension of research and development funds to all industries so that labour intensive industrial units could be established.
Former finance minister Sartaj Aziz stressed the need for tackling the energy crisis to avoid stifling of growth and reducing fiscal deficit to a manageable limit at around 5.5 percent of the GDP in the current fiscal year.
The report says macroeconomic balances have deteriorated very sharply. Inflation has touched record levels this year on the back of three previous years of high single-digit inflation. The burden of high prices, especially of basic food items, has become intolerable for poor households. Poverty is consequently on the rise again. Whatever decline was achieved in poverty appears to have been wiped out. Also, structural problems impeding growth have come dramatically to the forefront with major power shortfall and large-scale loadshedding.
In attempting to assess the present position, the report analyses the short-term causes of the economic unravelling as well as the underlying longer term factors that continue to impede our economic and social progress. The report stressed that macroeconomic adjustments must fully safeguard livelihood of low-income families.
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