Karachi :“Challenges illicit trade and parallel economy are caused by multiple factors, one of the significant one is high tax rates and that is coupled with a highly complicated system of tax collection. It gives huge incentive to evade taxes and demotivates to formalize,” said Ehsan Malik, CEO Pakistan Business Council in a webinar on illicit trade in Pakistan.
Commenting on the complicated taxation system in Pakistan, he added that there are multiple taxes including local taxes, provincial taxes and national taxes. They don’t speak to each other which is a challenge for business in Pakistan.
He said that there’s an opportunity to digitalize the systems and make it simpler for people and businesses to comply with regulations.
He opined that despite all the challenges, opportunities outweigh them. Realizing the problem and listening to the taxpayers will be the start towards a solution.” Punjab and center have been able to begin to rationalize the systems, other provinces are yet to follow,” he added.
Advisor to PM, Dr. Ishrat Hussain, MD PMI, Roman Yazbeck and CEO Daraz, Bjarke Mikklesen also spoke on the occasion.
Dr. Ishrat Hussain highlighted, “This government has separated tax policy and administration to ensure that honest tax payers and legitimate industries are not burdened further and tax policy does not hurt the economy. we are using NADRA and broadband penetration to integrate and chase people who are evading taxes,” he added.
The Managing Director PMI Roman Yazbeck said that In tobacco industry the legitimate, tax paying and regulated industry is losing to illicit trade year on year. Experts say illicit trade is 40 percent which can be an underestimate.
“It matters most if you want to quantify what is the loss to the economy which goes to Rs. 44bn. It’s not just a threat to legitimate industry but a threat to the economy and state,” he added.
While commenting on the solution he said, “Track and tracing system is the recipe. It has proven to be very effective and implemented in most countries. These are fiscal stamps to recognize every single pack and shipping case. This helps in tracing illegitimate production but also tracking and tracing the root cause of illicit trade.
Chief Operating Officer Daraz Bjarke Mikklesen said that from an ecommerce point of view cash economy is contributing to insufficiencies.
He said that digitalization and ecommerce is the solution. Presently he added huge amounts of smuggled goods coming to market from which the government is not able to collect taxes. It creates difficulty for legitimate sellers and businesses who pay taxes and hinder future growth, he added while appreciating that the state in general is taking the right steps towards solutions. However he cautioned not to make the solutions too technical.
He said the gap between laws and implementations needs to be bridged. He advised the government to use fraud prevention tools based on AI that have helped curb listing of smuggled products on ecommerce marketplaces.