LAHORE: As the authorities and key government figures have been drawing attention to the economic losses due to illegal trade, the country’s shadow economy accounts for about 40 per cent of GDP, while 6pc of the gross domestic product is being stolen every year, according to a study on tax evasion in five sectors, including tea, tobacco, tyres & auto lubricants, pharmaceuticals, and real estate.
The study conducted by the IPSOS—a global leader in market research—terms 6pc of the GDP being stolen, a significant amount of money that can be used to improve the living standards of the people by developing Pakistan’s economy on a sound basis.
It states the annual volume of tax evasion in these five sectors is around Rs310 billion, including Rs35bn from the illicit trade in tea; Rs80bn from tobacco; Rs90bn from tyres and lubricants; Rs45bn from medicines; and Rs60bn annually from the real estate sector.
Similarly, the report compiled by a team of Harvard economists and senior commerce ministry officials revealed that the top dozen commodities smuggled into the country generate as much as $3.3bn a year.
"A staggering 74pc of cell phones sold in Pakistan were smuggled into the country. When it came to vehicles, 53pc of diesel, 43pc of engine oil, 40pc of tyres, and 16pc of auto parts sold in the country were smuggled," the report reveals, adding that 20pc of cigarettes in Pakistan were smuggled, as was 23pc of tea. Surprisingly, law enforcement and regulatory bodies in the country are only able to seize 5pc of the goods smuggled into Pakistan.
Smuggling and illicit trade are a major obstacle to the national treasury as well as to the organised sectors and industries like tyre manufacturers doing business legally in Pakistan. The annual consumption of tyres in Pakistan is 14 million and around 15pc-18pc of demand is met by domestic production, while more than 50pc of the demand is met through smuggled tyres. Only 35pc of tyres are imported legally into the country.
“The government should take urgent steps to curb smuggling and import irregularities as, in the current scenario, Pakistan cannot afford a massive withdrawal of foreign exchange from the country in the form of imports or smuggling,” said CEO of GTR Tyre, Hussain Kuli Khan, while talking to Dawn.
National Foods CEO Abrar Hasan, while commenting over the report seconded this opinion and stated that fake consumer goods such as spices and other related items are posing serious threats to the FMCG market.
Published in Dawn, June 5th, 2022