KARACHI, April 5: Federal Finance Minister Ishaq Dar has promised to present before the people a true picture of national economy some time next week before he leaves for Washington to attend a World Bank/IMF meeting.

The two-day spring meeting of the donors is scheduled on April 17 during which the finance minister may also hold consultations with leaders of other countries involved in their economic management.

“I have received a thorough briefing from the Federal Board of Revenue during the last three days on economic situation,” Ishaq Dar told Dawn on telephone from Islamabad on Friday.

But before making his observations on the current economic situation public, he made it clear that the federal cabinet would review it for an approval.

“Yes, it can be posted on the website,” the minister agreed to the proposal, indicating that the media and the public at large may be able to share the perception of newly-elected rulers on the state of economy by the end of next week.

“Our taxation system is regressive and it hurts the poor,” the minister observed with a hint that it may be changed and entirely revamped in the next budget.

But how this change would be made and in what directions is perhaps too early to ask as minister is expected to discuss the taxation in the context of total budget, the relationship of revenue income with that of revenue expenditure, its impact on productive sectors (industry and agriculture) with his team of advisors, cabinet, and of course, the coalition partners -- the PPP, the PML-N, ANP, JUI and if the MQM also joins at a later stage.

Total tax collection in 1998-99 was Rs308.51 billion when Ishaq Dar was associated with the Nawaz government as finance minister.

From 1999-2000 to 2006-07 when government was taken over by General Pervez Musharraf, who appointed Shaukat Aziz as finance minister and then prime minister, the tax collection went up by 130 per cent to Rs847.23 billion.

Overall, the central board of revenue, which has now been renamed as Federal Board of Revenue (FBR), collected a total of more than Rs4.27 trillion.

The FBR is now set to collect more than Rs1 trillion in the current fiscal year which means that in last nine years, people of Pakistan contributed more than Rs5 trillion to the national exchequer.

This impressive rise in tax collection in the last nine years has not led to documentation of national economy or shrinking of black money in the national economy.

Studies by well-known economists in Pakistan and renowned international academic institutions conservatively estimate size of black economy in Pakistan at about 40 per cent of the national economy.

Dr Salman Shah, the former adviser to prime minister on finance, had put the size of total economy at 160 billion dollars or roughly Rs10 trillion.

On this criterion, assets worth about Rs4 trillion are not found in any books of accounts but are transacted by the holders of black money and these impact upon the social and economic lives of a overwhelming majority of the 160 million people of Pakistan.

Late Dr A R Kamal, who died recently, in his well-researched article on black economy in Pakistan, observed a seven to 10 per cent tax-evasion every year.

Even on a conservative estimate, more than Rs100 billion will be evaded from taxes in the current fiscal year if government manages to recover Rs1,025 billion targeted tax.

Lt-Gen (retd) Khalid Maqbool, now governor of the Punjab, estimated Rs218 billion tax-evasion in 2001 when he was chairman of the National Accountability Bureau (NAB). He too found 10 per cent annual tax-evasion. He shared his perceptions at an international conference in Seoul.

Taxes are levied for equity, social justice and to enable the government deliver quality services in education, health, ensure public safety.

“Never before in the history of the country, there have been so many social, economic and political conflicts at various levels as these exist now,” a senior political worker said.

He said that class conflict between the haves and the have-nots in Pakistan is at its peak. Then there are inter-provincial conflicts, the conflict between the over-centralised Islamabad and the rest of the country, and the conflict between the urban and rural areas.

“And never before this, the most powerful as well as a common man was so insecure and vulnerable as he or she is now,’’ is another observation with a question “where have Rs5 trillion gone as collected in the last nine years.’’

“The issue is not only tax-collection, but also prudent management of expenditure budget,” the political worker said, who is confident that Finance Minister Ishaq Dar, his team of advisers and the coalition partners would recover taxes as well as ensure cost-wise effectiveness of all expenditures, including those incurred on defence and intelligence agencies.

“Twenty per cent of the richest in Pakistan hardly contribute to 15 to 20 per cent of the total taxes, and 80 per cent of the people, who include poor sections, share the remaining 80 per cent,” said a lady teacher of economics in a local college.

She based her assessment on the studies made on Pakistan’s taxation system by the national and international organisations and individual scholars.

Bulk of the tax money is coming from withholding and presumptive taxation that hurts the poor while there are innumerable exemptions from income tax, sales tax and import duties to safeguard the interests of top echelons in civil and military bureaucracy and the rich in one name or the other.

As she found, the richest people in Pakistan -- textile tycoons, sugar barons, auto makers, cement factory owners, big traders, stockbrokers, real estate, beverage factories, hospital owners and doctors, professionals (lawyers, tax practitioners, engineers and consultants) hardly pay taxes.

Much of tax money comes from wage-earners and consumers.

Mr Dar is said to have explored the possibility of bringing the stock brokers and real estate dealers in the tax net in the next budget.

There are proposals of fixing a minimum holding period, from six months to one year, for granting exemption from capital gains tax on transaction of company shares.

For the last 34 years, the stock exchange presents a picture of big casino when its transactions were exempted from capital gains tax in 1974 after Dr Mubashir Hassan, the finance minister in the Z A Bhutto cabinet, was shown the door.

“Pakistan’s taxation policies encourage speculative trading, rather than investment in real sectors of economy,” observed former federal commerce minister Humayun Akhtar Khan, on falling exports.