ISLAMABAD: Caretaker Privatisation Minister Fawad Hasan Fawad on Monday said from 2018-2021, the government spent Rs2.54 trillion under the heads of subsidies, grants and loans to keep commercial SOEs operational, while the size of the government increased by more than three times in the last couple of decades.

Speaking at the third ‘Pakistan Prosperity Forum’ organised by the Policy Research Institute of Market Economy (PRIME), Mr Fawad, a former bureaucrat, said the taxation system of Pakistan not only incentivised people to stay out of the tax system but also contributed to de-corporatisation in the country.

He said the current state of the public sector was unsustainable and contributed to the deterioration in the business environment in the country.

“The public-sector reforms should include bureaucratic and taxation system reforms,” he said, adding that these two areas were crucial for improving performance of the state.

“Whenever there are talks of reform, they end with increase in the size of federal and provincial governments, and the power of state functionaries,” the caretaker minister said.

He said reforms also needed to focus on building capacity of the state to regulate markets from where the government exited and the private sector took over.

Highlighting the flaws in the country’s taxation system, Mr Fawad said around 93pc of the collected tax revenue was either voluntary or withholding, whereas, only 7pc was actually collected by the Federal Board of Revenue (FBR).

“But the FBR sends recovery notices to individuals worth billions of rupees while the actual collection is a mere few hundred million. Since 2016, the tax burden on corporate taxpayers has increased by more than 40pc on an average,” he said, adding that such a burden had not only contributed to encouraging people to stay out of the tax system but also de-corporatisation.

Speakers presented the diagnosis of the economic challenges by focusing on the debt crisis caused by unrestrained spending and suggested reforms to build an agenda for sustained economic growth.

Other speakers included economist Dr Nadia Tahir, Executive Director PRIME Ali Salman and Prime Advisory Board chairman Mohammad Rajpar who highlighted that reforms should start from the restructuring and re-sizing of the government to reduce its presence in the economy.

Former State Bank of Pakistan governorShahid Hafeez Kardar said Pakistan’s Gross Public Debt was 667pc of the revenue while external debt was 232pc of exports. Therefore the overhaul of the economy requires rationalisation of government expenditures, he added.

He stressed for a unanimous agreement by all political parties over any charter of economy, and suggested that the charter prepared by PRIME Institute could be adopted by political parties but it had to be implemented as well.

Rizwan Rawji, economist and a businessmen, presented the Charter of Economy prepared by PRIME and highlighted that political stability and strong political will held critical importance in promoting economic prosperity.

He said at present, out of five million tax filers, less than three million paid tax and a significant portion of sales tax was collected from a mere 400 entities.

Published in Dawn, November 28th, 2023