All Pakistan Business Forum (APBF) has urged the government to raise exports to 11 percent of the GDP till the end of its term with a keen focus on value addition for a sustainable economic trajectory. Moreover, the foreign direct investment (FDI) should only be encouraged that ensures net surplus in foreign exchange by curtailing imports and increasing exports, said APBF president Syed Maaz Mahmood. He said that IMF should be a stop-gap arrangement to reduce the magnitude of this bailout, which may have forced excessive devaluation, steep monetary tightening, cut in development and defence expenditures. The existing tax system is heavily skewed toward indirect taxation whereas a direct tax can certainly improve tax collection in some instances, he added.
He said the sustainable solution to Pakistan's problems lies in the structural reforms. Loans simply serve to bridge the gap until the effects of the reforms take effects. The problem occurs if the country takes loans but fails to reform, he added.
While talking about tax policy, he explained that it was largely contingent on implementation and systems of checks and balances. Right now, we can see very large inefficiencies in tax collection. For example, the number of active corporate income tax filers is around one percent of the number of commercial and industrial electricity users.
Similarly, the number of entities that are registered for the general sales tax (GST) is around 180,000 out of about 1.5 million retailers. The message is that tax compliance must be improved and tax base broadened. This cannot be achieved with a single policy change, but by a systemic approach, he added. The government preferred direct taxation to meet revenue shortfall as opposed to resorting to increasing indirect taxes because direct taxes tend to be more progressive in nature; therefore, the burden on the lower income strata of the population is lesser.
He said that consistent borrowing by developing economies to shore up its reserves in desperate times is only likely to lead towards a debt trap. He said that borrowing from friendly countries should only be seen as a short-term solution to prevent reserves depletion and consequent further depreciation of the currency.
Maaz Mahmood said that focus should be on promoting exports and restricting imports alongside making domestic industry more competitive and subsequently expand its export market. He emphasized that concentrating on import substitution is imperative to narrow import bills and certain imported products such as oil are of a fixed nature, therefore, the government needs to enhance focus on import substitution industries, as chemicals, agriculture and steel are potential industries.
The incumbent government's stance towards the IMF in its initial months of power was confusing. He said that undertaking structural reforms require political will. He said that the early signs from the government are positive and exhibit zero-tolerance against corruption.
He said that enacting structural reforms, such as improvements in tax collection system, bureaucracy and ease of doing business requires major political will and strict implementation of policies, he added.