PUNJAB and Sindh hope to put in place an advanced data collection system at selected retail outlets to get a sense of the size of the consumer market, based on sales turnover.

The long overdue move looks logical in a country where per capita spending exceeds per capita income. The latest data reports the per capita income in Pakistan at $1,254 (around Rs12,540), whereas 2011 World Bank data projected per capita consumption at $2,000 (Rs20,000). As consumer credit is not significant — the majority of people are not even served by banks — the huge undocumented economy probably explains the gap.

Tashfeen K Niaz, chairman of the Sindh Revenue Board (SRB), and the staff of Iftikhar Qutab, chairman of the Punjab Revenue Authority (PRA), told Dawn that projects to install point-of-sale (POS) system machines at designated outlets will be initiated this fiscal.

“If everything goes as planned, Sindh will again lead in initiating a valuable project to improve fiscal management,” Tashfeen said in a brief interview at his office, while mentioning the province’s progress on fiscal autonomy. He believes Sindh is ahead of other provinces in managing economic responsibilities post-18th amendment.

Turnover data collected directly from points-of-sales at selected retail outlets, including restaurants, is likely to lead to improved tax collection from the services sector

“We already have all the required approvals from the provincial hierarchy. The PRA is currently preparing to introduce a system to access sales turnover data from sale points,” Raja Babar, a senior officer, informed over phone from his office in Lahore.

Besides other implications, the booming parallel economy does not play out well for the tax collectors, as they are confronted with the challenge to generate resources from a fraction of the formal economy.

In the absence of verifiable data on the subject, it is difficult to assess the respected slices of different segments in the pie of the country’s informal economy. Taxation experts maintain that documentation is more of an issue in the service sector, which makes up 58.1pc of GDP, according to the latest Pakistan Economic Survey.

As the sales tax on services falls under the purview of provincial governments after the 18th amendment, the province’s concern in this regard is understandable.

Take restaurants and eateries for example. According to officially unconfirmed data available online, Pakistanis spend as much as Rs100bn a year in dining out at about 25,000 eateries all over the country. Another Rs10bn is reckoned to be spent on food deliveries.

Some experts and professionals active in the field find the estimates too conservative. “An intelligent guess puts the turnover at one restaurant on the seafront in Karachi at Rs5m a night, or Rs150m a month. What gives the situation an interesting twist is that it deals exclusively in cash,” an observer of business trends disclosed.

“If carrying cash is risky, the sight of waiters counting wads of notes is disturbing. I wish the authorities can do the needful to facilitate citizens who prefer to use credit cards and do not enjoy the luxury of private guards to shield them while they flaunt their wealth,” said an occasional restaurant visitor narrating a recent incident.

“Money-minting food outlets are enjoying a virtual tax holiday. It takes simple multiplication and a bit of logic to assess the scale of the sector. Though I believe it to be a gross understatement, still, if one accepts the Rs100bn annual figure and assume 40pc is being consumed in Sindh, Rs40bn is being paid in bills at food joints. Just pose this number against revenue collection from restaurants in the province and you will get an idea why every other businessman is keen to invest in the food sector,” he argued.

On request, the SRB forwarded data of revenue collection from the food business. The collection from 338 registered restaurants in the province in FY14 was Rs844m. This was up from Rs677m last year when there were 251 registered food outlets, and from Rs590m through 141 registered restaurants in FY12.

This shows that Sindh collects roughly 2.1pc in tax on the total volume of sale at food joints, assuming the projected sales turnover of Rs40bn yielded Rs844m in taxes.

Nauman Sikander, CEO of EatOye, a technology company facilitating food providers and customers, defended the food business. “Almost 90pc of the 2,500 established restaurants accept credit cards.” He accepted that the food sector has grown in size but the management has remained rather immature.

“The relevant authorities need to encourage these units to adopt a professional approach and introduce sustainable business models to deliver services in a socially responsible fashion,” he commented.

Replying to a question on cash dealings at popular food joints, SRB Chairman Tashfeen Niaz questioned, “Under which law can we force a private business to use credit cards if they are accepting a legal tender?

“We would like create a business environment, with the help of banks and other stakeholders, where it better serves the interest of the private sector to behave professionally and their refusal to accept plastic money would hurt their business,” he explained.

Published in Dawn, Economic & Business, July 7th, 2014