A report in Bloomberg’s Businessweek shows us the side of Pakistan which is not visible to the ordinary economist–except perhaps Imran Khan.
Pakistan’s Tx Collection is one of the lowest in the world, standing at 8%. Rival Bharat has increased it to 18%.
- The Underground economy employs more than three quarters of the nation’s 54 million workers and is worth as much as 50 percent of Pakistan’s 18 trillion rupee ($200 billion) official gross domestic product.
- And while the documented economy had its smallest expansion in a decade at 2.4 percent in the year ended June 2011, soaring demand for cars, cement for houses, and other goods shows the underground market is thriving.
- “Everything from auto parts to sports goods, knitwear, clinics, and beauty salons fall into the informal economy,” says Sayem Ali, country economist at Standard Chartered Bank in Pakistan. “All these make a significant contribution to employment and income, and that’s one reason why the economy is still growing. But since Pakistan has one of the worst tax structures in the world, these fall under the radar.”
It is estimated that agriculture may account for as much as 35 percent of GDP1.5 million people, (less than 1 % of the population, file tax returns). That compares with 3 percent in India.
- Evidence of consumer demand is everywhere as new shopping malls and restaurants in Karachi are filled to capacity. Car sales rose 14 percent in February from a year earlier, as more people could afford a Toyota Corolla or Suzuki Mehran (a small hatchback), according to the Pakistan Automotive Manufacturers Association.
- More than half a million motorbikes hit the road in the eight months ended February, a 5 percent increase, perhaps a sign that Nasir’s tire business has a bright future.
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- 1 Trillion Dollars stolen from Pakistan: Imran Khan (rupeenews.com)
- Pakistan’s economy in four emerging markets list (rupeenews.com)
- Demonocracy vs Democracy (timesofislamabad.com)
Great news, if Pakistan is really doing so well. We knew Pakistan has fertile land and hard working people, and it was just a question of when and how soon.
One point I did not fully understand was that Pakistan has low tax rate and still high undergroud economy employment of three quarter of the workers.
Thanks.
Because of corrupt officials, people do not pay taxes
The underground economy does not pay taxes, and is tax free. That is why it is called “Underground”. It hides the real GDP of the country.
Thanks Akhbar Navees. That was my understanding out in the West but this will help those not gamiliar with the term as iy used in taxation and economics.