Government moves have a decisive impact on shaping the costs, risks, and barriers to competition in a location, which influence investment and productivity improvements that can benefit both workers and consumers. The governments that can successfully manage these issues in turn determine their rate of success in collecting revenues they require to remain self-sustainable and responsive to the needs of the citizens. The State of Gujarat in India serves as a good example, which not very long ago was struggling to meet its fiscal obligations, but has, just in the last few years, reformed its management and become an example of good governance that should be emulated by other state or provincial governments. While India still ranks a lowly 171 amongst 183 economies on the ease of paying taxes, its state of Gujarat, on the other hand, is leading the way by showing other governments on how to deliver first and demand reciprocity later in the shape of taxes. As its governance improved, the tax collection responded in the same measure. For example, today Ahmadabads corporate payments on average and as percentage of the States budget exceed their counterparts in South Asia by 2 to 1 and nearly 7 to 1 when compared to similar sized areas within China and Brazil (BRIC members). So, what did the Gujarati government do right to achieve this? The answer: Nothing new or revolutionary, but simply the implementation, in letter and in spirit, of the basic prerequisites that all economists, politicians or bureaucrats must have known or at least heard numerous times. Look inwards and start by reducing corruption, lowering taxes, minimising regulatory burdens and red tape, supporting infrastructure and finance costs, and regulate the labour market. Gujarat during 2010 boasts of being amongst the top in India in terms of corporate friendliness measured in the light of (a) hours of power outages; (b) hours of telephone outages; (c) hours of sales lost in transit; (d) hours of sales lost due to power outages; and (e) days of inventories kept for main input (proxy for quality of transportation). o Improve investment climate. Cost and availability of finance and the value of collateral required to obtain a loan as we know can be the key difference between an entrepreneurs idea becoming a reality or just remaining a dream. Entrepreneurship is about innovation and risk-taking, the very mixture that stimulates investment, drives small- and medium-sized businesses and alleviates poverty by creating jobs. This has been the area of weakness in Pakistan where the governments diminishing role in the financial institutions has unleashed a culture of banking based upon zero risk taking on budding aspirants, crowding out of the private sector. And a spread for banks has in effect sucked the profitability out of businesses, industry and the market per se. India, on the other hand, has played it prudently. In the period of extreme global recession/downturn, and its private banks did put the breaks on private lending, but its public banks (that still dominate the market), and in particular the State Bank of India (SBI), which has a fifth of the market, instead undertook a lending splurge. The private sectors presence on SBIs balance sheet doubled between March 2007 and March 2011. o Ensure policy predictability and credibility. Businesses loathe surprises and hidden costs. It is of assistance to the firms if the government has transparent and predictable policies that are enforced in a credible manner. Gujarat has a single access window known as the Industrial Extension Bureau (INDEXTB), as a point of contact for an entrepreneur wishing to set up an industrial venture. INDEXTB, in addition, assumes a proactive role by identifying investment opportunities, information provisions, marketing and investment provisions, and providing the entrepreneur any other assistance that he/she may require. It is important to know that 'ease of conducting business in a place was rated at number two in the last reported Investment Climate Survey. o Facilitate tax paying by reducing the number of taxes and rationalising tax rates. There are numerous taxes in India varying from 59 in East Punjab to 78 in Andhra Pradesh. The South Asia average is 37 and the OECD average is 13. Complicated and difficult tax structures coupled with an enhanced contact between the taxpayer and the collector tend to have a negative affect on revenue collection that in turn promotes the undocumented parts of the economy. Gujarat over the last seven years has not only worked very hard to reduce the number of taxes and tax payments in a year, but has also endeavoured to minimise the contact between the taxpayer and its tax collecting machinery. Based on the above scale of facilitation, from being ranked 67th in South Asia today it has moved up to the 12th position. No wonder, when talking to an old friend based in Islamabad, who has regularly been doing antiques business with a dealer in Gujarat, he explained that how his supplier who until a few years back was not willing to give a full invoice for his purchases now on the contrary refuses to under-invoice o Finally, a firms decision to keep operating and pay its dutiful dues rests largely on its assessment of the costs, risks, and barriers to entry, exit and competition associated with the opportunities in a location. For this very reason, the costs associated with crime, corruption and regulatory burdens were ascertained by the Investment Climate Survey as the number 1 factor in undertaking business and investment decisions. We are in a habit of comparing ourselves with India and there is no harm in it. However, when parallels are drawn in the context of tax to GDP ratios we must take into account that todays India out of its total tax to GDP ratio of 17 percent, not only draws nearly 5 percent of it through its states (ours is less than 1 percent), but this source of contribution also has the high growth rate within the ambit of its tax ratio. After the process of devolution in Pakistan where most powers stand devolved to the provinces, the onus essentially lies with the provincial governments to help shore up the desired revenues. The prudence of devolving so many powers to the provinces and so quickly without much debate and adequate preparation and no real transition period is questionable. Besides, how a handful of lawmakers representing less than 10 percent of the population, with no visible representation from the real economic stakeholders of the country, and working secretively behind closed door sessions can decide the destiny of our nation is altogether a different debate, which is better left for another write-up. However, for now our provincial leaderships will be well served by learning from their counterparts in Gujarat, because given the right environment Pakistanis are also sincere and honest taxpayers n The writer is an Entrepreneur and an Economic Analyst. Email: