When the PML-N government was formed in 2013, the country faced the prospect of default on IMF loans and it perforce had to go back to the Fund for another Extended Fund facility. Currently the Finance Minister is in Dubai for the 12th and the last review of the programme. Mr. Dar reportedly has expressed the confidence that Pakistan will terminate its dependence on IMF with the completion of the current programme. That surely is a sign of the economy having achieved stability made possible by the macro-economic and structural reforms introduced by the government that has ensured rising growth, decline in inflation and reduction in budget deficit. The budget deficit is considered to be the mother of all economic ills. In 2013 it stood at 8.8 of the GDP which has been reduced to 4.3 within a span of three years due to expansion in the tax net, stable external accounts and higher reserves.

Making Pakistan self-reliant and lessening dependence on foreign loans and assistance undoubtedly requires generation of more resources indigenously through the expansion in the tax net by bringing more and more sectors into its domain and taking effective measures to reduce the volume of the black money circulating in the country. The economist estimates that the volume of the black economy in Pakistan is more than 50% of the real economy. That means that there exists huge potential to boost government revenues by identifying those areas and sectors and taking legal and administrative steps to ensure that those engaged in the black economy are tempted or forced to contribute to the government revenue as responsible citizens.

Viewed in the backdrop of the foregoing facts and the prevailing situation, the government has very rightly decided to regulate real estate sector through the introduction of a new system of valuation of fair market value of property for major cities, bringing down holding period from five to three years for paying capital gain tax which will be between 5 to 10 percent of the determined value. This package has been finalised by the government through negotiations with the property dealers, representatives of the business community and real estate investors. The government believes that the measure would generate between Rs.60-70 billion extra revenue as against Rs.8 billion collected during the current year. That indeed is a big boost. The initiative is also estimated to whiten the black money to the extent of Rs.12,500 billion which is nearly 35% percent of the GDP.

It is ironic that while everybody talks about self-reliance and reduction in the budget deficit and the need for expansion in the tax net, when it comes to paying taxes that the government imposes, there is invariably a resistance by the political opponents of the government and some vested interests. Pakistan is a country of nearly 180 million and according to the available data only a little more than three million people pay income tax.

Bringing the real estate business under the tax radar will not only generate more and the much needed revenue for the government but also help in eliminating corruption that plagues this sector in connivance with the revenue department. The land valuation will no more be done by the Deputy commission or the DCOs but by the FBR. It is an irrefutable reality that the values determined by the Deputy Commissioners for different cities and areas within the cities were far less than the actual market prices of the properties being bought and sold. The real estate investors, property dealers and the revenue department officials were the biggest beneficiaries of the clandestine under-valuation of the property while the government lost substantial revenue.

In accordance with the agreement with the property dealers and real estate investors an Ordinance giving effect the new initiative from 1st July has been issued and the FBR has also notified new valuation rates of properties for residential and commercial plots for major cities including Karachi, Lahore, Rawalpindi and other cities. The provincial government will also take necessary action at their ends.

Pakistan to become self-reliant having minimal dependence on institutions like IMF, increased dependence on expansion in the indigenous tax resources is absolutely indispensable. It is just the beginning of bringing the black economy under the reach of the government. Vigorous efforts are needed to bring other sectors of the black economy in the mainstream of the economic milieu. Equally important are the reforms in the tax collecting system because lot of revenue expected to be collected through the existing taxes goes to the pockets of the tax collecting functionaries as a bribe for underestimating the amount of tax to be paid by the tax-payers.

The imposition of new taxes, no matter how much indispensable, is always an arduous and the most unpleasant undertaking by the governments all over the world, more so in the poor third world countries where there is no established tax-paying culture. That is why it is said that the management of the economy is indeed a very cumbersome and convoluted responsibility to shoulder. Under the prevalent global economic order, the economies of the countries are not only affected by the internal factors but also the developments taking place at the global level due to their interdependence and economic linkages.

However there is no denying the fact that the PML-N economic team has handled the economy very deftly in the face of a host of debilitating factors. Their prudent management and reforms have produced much needed results and the economy is now well on its way to a sustained development. This phenomenon has repeatedly been endorsed by the international lending institutions including IMF, World Bank, Asian Development Bank, rating agencies and the international media. Their projections about the future are also very encouraging. Projects under CPEC are likely to generate economic activity of enormous proportions in the years to come as they reach completion. Similarly the completion of the power generating projects with a cumulative power generating capacity of 10,600 MW by 2018 under CPEC has the potential of not only to tide over the current energy crisis in the country but also to meet future energy needs of the country, supplemented by other power projects like Neelum-Jhelum which are already nearing completion and the solar energy units commissioned in Punjab and elsewhere. The future economic horizon of the country looks quite encouraging provided the efforts continue un-interrupted by political factors.

The volume of the black economy in Pakistan is more than 50% of the real economy. That means that there exists huge potential to boost government revenues by identifying those areas and sectors.