The ones who could not turn up for work missed their wages while those who could not go home worked for hours on end filling in for their absent colleagues, he said. “I have learnt that there were some workers who could not go home after their shifts and so they worked in the factories for 50 to 55 hours in the last three days to deliver the shipment on time,” Ali said.

Pakistan would have collected Rs800 billion in additional revenues last year, if the tax-to-GDP ratio had been maintained at over 13 percent, which was achieved some years back, Federal Tax Ombudsman (FTO) Shoaib Suddle said on Thursday. “The amount equals to $9 billion is enough to maintain the fiscal position of the country,” he said at a seminar organised by Transparency International, Pakistan.

Despite increase in utility prices, wages and continuous rupee depreciation against the Japanese Yen and the US dollar the domestic auto assembling industry is moving ahead full throttle fuelled by rising demand, industry executive said. “The auto industry is leading the large-scale manufacturing (LSM) sector growth by continuously increasing capacity through investment and productivity to meet recovering market demand,” said Raza Ansari, Head of Marketing and Corporate Planning, Indus Motor Company.

Under a condition of the IMF, Pakistan was bound to levy Value Added Tax (VAT) from July but it failed and then announced a reformed GST from October by scrapping tax exemptions on goods and netting services. Technically, the IMF’s $11.3 billion bailout package for Pakistan has come to an end as the government failed to impose VAT. The reason was Sindh’s stance that GST collection on services was a provincial subject and it will not give up its right. Other three provinces have agreed to hand over their tax collection right to the Centre for a certain period due to administrative constraints. Nevertheless, the sources said, the Sindh government has shown some flexibility of late. It has offered to the Centre four main areas – financial services, construction, advertisement and franchises – mainly because these fall under the category of inter-provincial services.

This elegant design, excellent comfort and cutting edge technology however, will set you back by Rs. 7.5 million, making the car highly exclusive. When asked about the BMW’s potential market in Pakistan, Mazhar Khan told us that the manufacturer caters to a select group of 280 families in the country. He was optimistic about the car’s future and said that it is “in a class of its own”.

Anwar explained that at present only 14 per cent of Pakistan’s population is banked and Islamic institutions have an enormous potential to grow since many people in the country are opposed to the concept of interest.

One of the principal reasons for the low tax-to-GDP ratio of Pakistan, which stands at just 10 per cent, is the under-taxation of over 70 per cent of the economy, consisting of the agriculture and services sectors, which contribute less than 30 per cent to tax revenues. Any sensible tax reform, therefore, would attempt to spread the tax burden more evenly in the economy by reducing taxes on industry and raising them elsewhere in the economy. The objective of the move towards a broad-based VAT, now known as the reformed GST, is precisely to accomplish this. The reform will lead to a standard rate of 15 per cent, down from 17 per cent, and reduce the burden on existing taxpayers, primarily from manufacturing.

At this critical juncture, what was needed was for the SBP to step in and restore a measure of discipline. It needed to counter the excess demand pressures coming from the fiscal side. Given the state of the economy there was certainly no room to cut interest rates. The SBP policy rate was barely positive in “real” (inflation-adjusted) terms so one could argue that monetary policy was not tight enough to begin with. Of course, some will say that we should not be looking at present inflation but expected inflation to judge whether monetary policy is tight enough, should be tighter, or whether it needs to loosen. While that is technically correct, the path of expected inflation at this moment is highly uncertain. As noted above, the macroeconomic framework has been thrown off-track. The consolidated (federal and provincial) fiscal deficit for this year could be headed towards 6 per cent of GDP rather than the desirable four per cent of GDP because that four per cent figure assumed that the provinces would deliver a combined fiscal surplus of 1.5 per cent of GDP. This year’s inflation target of 9.5 per cent – disappointingly un-ambitious to begin with – was consistent with the four per cent deficit target. What might be the likely rate of inflation this year that would follow from a consolidated fiscal deficit out-turn of six per cent of GDP or more?

The SBP monetary policy announcement comes in the wake of the IMF delaying disbursement of its next tranche – due almost entirely to weaknesses on the fiscal side of things – and the money markets’ demand for a premium on long tenors in the failed PIB auction of mid-July. So now the money markets, the IMF and the State Bank are all saying the same thing: we don’t believe you will be able to raise the kind of revenues you have programmed into your budget.

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