Unfortunately no serious effort has ever been made by successive regimes -- civil and military alike -- to devise a rational tax policy for encouraging corporatisation of businesses leading to economic growth. The sole stress on irrationally-fixed revenue targets -- with main incidence on the weaker sections of society -- has created an ugly fiscal mess.

The persistent failure to provide through an integrated policy regime a pro-growth competitive private sector, conducive environment for new firms, entrepreneurial capacity-building, efficiency and productivity through industrial, agricultural and competition policies, legal and regulatory framework, investment climate and good governance, broadening the tax net and cracking down on untaxed assets, ill-gotten wealth, spend public money prudently and remove socio-economic imbalances has pushed Pakistan into a state of perpetual crisis. Caught in deadly debt trap, we need to act fast and devise prudent policies aimed at transforming the traditional economy into an innovation-driven one.

The biggest challenge is how to increase exports at the level of 20 per cent of GDP -- exports-to-GDP ratio has decreased from 16.72 per cent to 10.59 per cent during the last three decades.

Economic challenges faced by Pakistan are multiple and grim -- we are ensnared in a deadly debt trap, but there is no will on the part of the rulers to come out of it by tapping the real tax potential and stopping wasteful and unproductive expenses. Our total debt is now nearly 68 per cent of GDP and it is increasing due to sheer callousness of the rulers.

During 2016-17, Pakistan obtained a record high $10.1 billion in foreign loans to repay old debts and support foreign exchange reserves. According to a press report, "about 37 per cent or $3.9 billion of the total external borrowing came from China alone -- Islamabad’s new lifeline. This includes $2.3 billion in commercial loans and another $1.6 billion under the bilateral economic assistance".

One of the main reasons behind the growing reliance on foreign lenders is the government’s inability to enhance exports that have been constantly declining since the PML-N government came into power. In the last fiscal year, exports stood at only $20.44 billion, which were just 6.7 per cent of the total size of the economy, the report adds.

According to the State Bank, fiscal year 2016-17 witnessed the current account deficit of $12.1 billion or 4 per cent of the GDP. The government resorted to reckless borrowing to bridge the deficit. Even after this, foreign exchange reserves fell by $2 billion to $16.1 billion by June 30, 2017.

Another area of concern is repressive tax policy that is detrimental for savings and capital formation for enhancing investment resources within the private sector for economic development. Besides corruption and incompetence, inconsistent tax policies of Federal Board of Revenue (FBR) have forced the business community to search for safer havens abroad, depriving the country of invaluable capital. Similarly, foreign investors are reluctant to avail the tremendous Pakistani talent that goes to waste for lack of proper funding.

Pakistan is one of those very fortunate countries of the world that has an abundance of resources and a climate that is fit for simply any activity throughout the year. But thanks to donors’ agenda of overemphasis on retrogressive taxation and incompetence of our economic wizards (sic), Pakistan’s dependence on imported products has increased manifold, whereas value-added exports have not been given any attention, let alone promoting high-tech industries capable of technological innovations -- modern economies are knowledge-based and the future is for those who can develop them as quickly as possible.

For technological transfers, rapid industrial growth and employment generation, foreign direct investment (FDI) is desirable. In Pakistan, when local investment is declining, expecting FDI is like living in a fool’s paradise. Tax incentives play an important role in attracting FDI -- which has nose-dived in Pakistan during the last decade. Tax policy constitutes an important, if not a determinant factor, for favourable investment behaviour. Unfortunately, our budget makers have always been preoccupied with revenue targets and have never bothered to provide some long-term investment-oriented tax incentives for infrastructure development, investments and employment generation, without which sustainable growth is not possible.

Foreign investors will not come to Pakistan for the main reasons of lack of transparency, energy shortages and poor infrastructure. Nobody is willing to invest even in special economic zones, where tax incentives are available. Even the existing industrialists due to rising cost of doing business and hostile tax policies are shifting their capital abroad. Investors, both domestic and foreign, prefer a place that characterises stability, consistency and requisite infrastructure facilities -- we lack all these. Tax incentives do matter but not as first priority -- any feasible growth-oriented project can be profitable after paying reasonable taxes. In Pakistan, corporate taxation is still very high (31 per cent for a company plus 10 per cent tax on dividends). In reality it should not be more than 20 per cent.

Pakistan also faces the Herculean task of providing jobs to millions -- on an average we need to create 1.2 million jobs annually for young people alone. For achieving this task we have to ensure that economy grows at the rate of 8 per cent to 10 per cent per annum over a long period of time -- for this we need investment of 20 per cent of GDP. It is thus imperative to raise tax-to-GDP ratio to 30 per cent. This challenge is also our great opportunity for economic progress.

Majority of job seekers are young people, which are our greatest asset -- imparting education and skills to them and creating matching jobs is the real challenge. This can be met successfully by assignment of taxes for productive investment and employment generation -- our real engines of growth. The prevalent pessimism is due to attitude of the rulers and financial managers, who cannot think beyond what they are "commanded" or "trained" to think. They keep on telling us about the symptoms of an ailing economy but never try to cure the real causes of illness.

We need to incentivise corporatisation of business. There are numerous anti-corporate provisions in the tax codes. The companies are maltreated by FBR -- after collecting billions as ‘collection agents’ of the State without any compensation they are penalised for small lapses that are neither intentional not willful. Taxation of notional benefits e.g. concessional loans in the hands of employees, high corporate tax rate and double taxation of dividends and reserves out of already taxed profits are some examples of anti-corporate provisions -- the list is not exhaustive.

Under these circumstances, no one would like to conduct business through a company, especially when audited accounts by independent and credible auditors are rejected just on whims and without bringing any material on record by taxation officers. Litigation is imposed on the companies and they have to hire costly professionals to get justice. It is thus no surprise that ranking of Pakistan in World Bank’s ‘Doing Business 2017’ is as low as 144.

Devising an efficient model for high growth with emphasis on exports requires an analytical study of all the irritants prevailing in all institutions and laws. Comprehensive structural reforms are the key to make Pakistan a success story in the wake of Chinese economic initiatives in this region. The main irritant for business growth is highhandedness, corruption and unprecedented high level of maladministration in tax apparatuses -- both at federal and provincial levels. Experts must analyse the existing negative statutory, regulatory and administrative frameworks and then suggest solutions to remedy the situation for promoting growth and creation of the much-needed jobs.