It was a rather disappointing and bizarre press conference by the Finance Minister and the Chairman FBR last week, explaining with some self-prepared slides on how the country is being robbed of around 3.5 trillion rupees annually by the top industrialists. Also, how the chief financial officers, auditors, etc. should refrain from signing accounts unless they are one hundred percent sure on all figures, because otherwise they risk a jail sentence. Not that one is carrying the non-taxpayers’ or tax dodger’s brief, one wonders who prepared these slides and what kind of a practical industry/manufacturing experience do they have, if any. In essence, without going into the merits or demerits of the allegations per se, the real concerns are on a) an absence of discretion that is necessary in such matters, b) the data shared on national media should have been prepared by a third party independent firm with known market credibility and c) what exactly is the message being conveyed to the masses at large and to the international business community per se (customers, partners and investors, etc.)? Is it that the poverty and inequality in Pakistan should in effect largely be attributed to the industry and not to poor policy making or shoddy economic governance OR that hey, look the international businesses should be weary of their Pakistani counterparts, because you know they can turn out to be cheats OR perhaps the brilliant idea is to disrupt the corporate chain of command and its operative discipline by engineering a revolt against managements, which by the way would invariably destroy the entities in general and not just the ones allegedly involved OR may be a simple warning message that please do not invest in Pakistan in JVs, as you may just be joining a clique of tax thieves OR a pre-warning to please not ever come in to the tax net, because remember we have these self-tabulated graphs and data to punish and publicly shame you for becoming taxpayers, albeit without a right of prior defence! So, whatever happened to prudence here and surely, in another country with a proactive judiciary, the gentlemen could be liable on various counts, including slander!

The reality is that Pakistan has been deindustrialising at a rapid pace for almost a decade now and has become an uncompetitive production destination for manufacturing to cater to the global supply chain. This is what this government needs to focus on, meaning how to improve the ease of doing business and mobilise the private sector. One keeps on pointing out that the direction is largely skewed, since the state’s footprint is expanding at the expense of the private sector, a phenomenon that is the underlying reason for the economic impasse we face today. The more the state involves itself in unnatural investment drives (both domestic and FDI) the more the economy suffers. A cursory glance on the mega investments that have gone wrong over the last 3 decades and one finds that almost all are in the public or the state-owned sectors and needless to say that one can hardly pin-point a state-owned enterprise that is a real success story; history tells us that almost all profitable industries nationalised back in the 70s were run to the ground by the bureaucracy. It is this lesson that today’s economic managers need to learn from. Move the capital from efficient hands to the inefficient ones and a country’s economic fortunes dwindle. Back in 1991/92 the total debt available in the market in India was taken up by the government to the tune of approximately 82%, whereas in Pakistan the state only accounted for 64%, but fast forward it to 2022/23, in India the state today only accounts for around 45%, whereas in Pakistan the state’s share has instead gone up to nearly 83%: the results of this shift require no explanation.

All over the world the successful revenue collection agencies pride themselves for being discreet; self-reliant on an internal data processing mechanism that is kept under wraps for the elements of surprise, risk of compromise and randomisation in profiling; and last but not least on the very distance they maintain between the taxpayers and the revenue collectors. For example, in the USA where the Internal Revenue Service (IRS) is one of the most feared revenue authorities in the world, at the same time it is also mostly invisible, albeit with a clear and strong reputation that if and ever one comes into its scrutiny, be very sure that errors or evasion will not go unpunished. While one appreciates that the Chairman FBR may be very well meaning in his zest, but it is really on these principles that one was expecting to hear from him: On what kind of reforms he plans to ring within the institution and what steps will he be taking to weed out corruption, inefficiency, complicity and incompetence from the department; a house-cleaning or a self-correction drive which will automatically go on to achieve all the rest. As for the finance minister, one is not even sure that why was he even there in the first place, as surely he should be thinking economic management and course correction through a much broader lens and not reduce himself to a limited level that can in-turn adversely affect the primary economic engine in which all facets need to operate in tandem.

In a fast-evolving world of economic management, our economic leadership has to keep itself abreast with new challenges that have emerged in a post Covid world affecting not only supply-chain and relationships, but also a change of thinking on key issues previously considered to be sacred, like global warming, protection to home industry, free and fair competition and even on transparency in international trade agreements. Events in Sri Lanka and Bangladesh are an eye opener for a socialist swing closer to home and the rise of the libertarians in quite a few South American and European economies (also lately in the US) is a signal of discontent with governments who tax sans reciprocity and without undertaking their own scrutiny cum accountability. This is a time for us to also tread carefully in Pakistan, because the country is extremely polarised and what we need is calm to keep industry (whatever is left of it) going, especially amidst a population surge that requires jobs for one of the largest young employable populations in the world. Collection of fair taxes is imperative, however to optimise collection, the subject requires a much broader discussion-platform entailing many dimensions, both from the side of the taxpayers and the government. To do this intelligently and prudently, we would be better off avoiding shenanigans and instead opening a dialogue involving all stakeholders through institutions like the ICAP (Institute of Chartered Accountants of Pakistan), SECP (Securities & Exchange Commission of Pakistan), PICG (Pakistan Institute of Corporate Governance) and the SBP (State Bank of Pakistan). God knows we have had more than our fair share of mavericks and don’t need any new ones!

Dr Kamal Monnoo
The writer is an entrepreneur and economic analyst. Email: kamal.monnoo@gmail.com