Pakistan’s National Budget is written on decade old templates that are, for all intents and purposes, copy/pasted year on year thereby creating a document that has little connection with what is needed on ground for the people of Pakistan. The distribution, through National Finance Commission (NFC) award, of tax and other receipts collection leaves only about 42% with the Federal Government. In contrast, the Federal Government retains 100% of any amounts that are borrowed. This loophole results in a natural tilt of the Federal Government to borrow more money (rather than to increase collection of tax and other receipts). Additionally, there is no reprimand of violation of constitution by any government while borrowing more than what the constitution allows.
Pakistan Freedom Movement aspires to re-write the national budget of Pakistan to reflect the current needs of its citizens. With a special focus on raising the tax revenues, PFM will discourage excessive and unconstitutional borrowing that will become unnecessary if appropriate taxation revenues are being met.
Whereas, PFM believes in bringing individuals and businesses into the tax net, it would also focus on the main causes that are consistently expanding the “undocumented” economy of Pakistan. We believe that this undocumented economy has created black holes that hold enormous potential of tax revenue growth. Bulk of these black holes exist in two sectors where money disappears in Pakistan … real estate and stock market.
The ability to make money disappear in real estate in Pakistan is facilitated by the conflicts that exist in “title” of land and property in Pakistan. Apart from strangling the growth of housing sector and being a major hurdle in creation of mortgage industry in Pakistan, the “title” conflicts help potential taxpayers evade tax by manipulating the name on the title or by not registering the title at all.
Pakistan Freedom Movement will resolve the conflicts relating to authenticity of “title” of land and property in the country. A mandatory requirement of obtaining “Title Insurance” for every title transfer will not only resolve the conflicts relating to “title” in Pakistan, but will unleash the extraordinary demand of housing in the country, while also creating hundreds of thousands of jobs in the new segment of “Title Insurance”. More importantly, this will plug the black hole through which money can so easily remain invisible from the declared economy.
As for the stock market, this avenue gives people the ability to whiten their wealth if they were to invest in stocks (with no questions asked for whereabouts of investment monies). Further, trading in stocks is barely taxed. While these advantages attract wealth to enter the stock market to give it a boost, these also provide undue advantage to the Pakistani stock market when compared with competing countries. Resultantly, the stock values tend to remain elevated for reasons other than the real performance of companies.
In short, the economy of Pakistan will be restructured on modern lines keeping in view current needs of the citizens while establishing a “just and fair” taxation system which promotes direct taxation (rather than indirect) and admonishes tax evasion and non-declaration of wealth. Indiscriminate borrowing by the government will be discouraged, while reinvigorating the public private partnership criterion to involve the vibrant private sector in bridging the gap in development works where government can better play a role as facilitator. Black holes will be plugged and illegal money will be caught, penalized and brought under tax net. Subsidies will be discouraged to the extent possible, unless targeted for marginalized people.
Finally, the public sector development plan will be spent throughout the country with equity. Initially, Rs 500 billion will be allocated for construction of 250 new planned mini-towns of 2,000 homes each, 2 in each district of Pakistan. This will not only kick start the economy through large scale construction activity, but will ensure that money is spent with geographical equity.