According to former State Bank of Pakistan governor Dr Ishrat Hussain, the cost of production is very high in Pakistan due to high utility bills. The erstwhile governor is true to some extent as not only the business and industry suffer high cost of electricity and gas bills, but also are there several other hidden and shown expenses which increase the cost of production. Besides, there are several government agencies which aggressively hunt the business organizations on one pretext or the other to mint money. In the absence of a national coherence policy, the departments work in isolation and create hurdles for the business operations. The former governor also criticized the country’s taxation system, which is one of the biggest hurdles in the promotion of business, trade and industry in the country. The officials enjoy unlimited powers and the target of their actions is the taxpayers. Those who avoid coming under the tax radar avail all the government utilities and facilities without paying anything in return. There is a need to rationalize tax rates and enhance tax net by devising a mechanism and not by witch-hunting the business community. The tax system is complex and sometime taxes are overlapping which need to be rationalized and simplified. The number of indirect taxes should be decreased and the area of direct taxes be enhanced through a mechanism.
On another note, despite various positive indicators, the exports of the country dwindled during the last four and half years. Dr Ishrat regretted inability of the Pakistani business community in exploiting GSP Plus status and failed to enhance exports despite getting zero tariff granted by the European Union. According to him, the government blames the industry for the failure and the industry holds the government responsible for the situation. Both the government and the business community could not timely avail the windows of opportunities. Quoting a World Bank study, he says that a 1 percent rise in tariff complexity contributes to a 13 percent decline in export growth. The situation is even worse when the government fails to realize that high tariff rates actually axes export volume. At a time, the new world economic order is emerging, at least 70 percent trade is held through Global Supply Chains and 30 percent through re-exports of intermediate inputs. As a heavily taxed country and complex trade procedures, Pakistan is not part of the emerging trends in international trade. A wake up call is necessary for the policymakers to revise their economic policies before it is too late to do anything good for the country.
