ISLAMABAD: Pakistan will raise $623 million by forcing wealthy tax evaders to cough up, the country's finance minister said Thursday, speaking on the eve of unveiling the budget for the next financial year.Finance Minister Abdul Hafeez Shaikh did not go into details about how they would be made to pay. Analysts say meaningful tax reform should lift exemptions on powerful interests, such as the country's enormous agriculture sector.
Pakistan has long defied Western pressure to end giant tax-dodging in a country where barely one percent of the population pays at all, as a corrupt bureaucracy starves energy, health and education of desperately needed funds.
The IMF last year halted a $11.3 billion assistance package over a lack of progress on reforms, principally on tax.
In the wake of catastrophic 2010 floods that cost the economy $10 billion, Washington donated hundreds of millions of dollars and demanded that Pakistan's rich, whose lifestyles outstrip many in the West, step up to the plate.
"The government plans to bring into the tax net, rich people who have so far been evading taxes and hopes to collect 53 billion rupees ($623 million) from new taxpayers," Shaikh told a press conference.
"It will boost confidence and reduce dependence on foreign assistance," he said, adding that "enhanced tax collection" will reduce the need for loans.
Pakistan's tax revenue amounts to less than 10 percent of GDP -- one of the lowest rates in the world and worse than in much of Africa, say economists.
Shaikh said the economy had grown only 2.4 percent in the fiscal year ending June 30 with the fiscal deficit at 5.3 percent of GDP and inflation at 12 percent.
An annual government review said that a decade of the "war on terror" had cost the economy $68 billion.
"Western countries, including the United States, continue to impose a travel ban for their citizen (investor, importers etc.) to visit Pakistan," said the document, reviewing the economy from July 2010 to April 2011.
"This has affected Pakistan's exports, prevented the inflows of foreign investment, affected the pace of privatisation programme, slowed the overall economic activity, reduced import demand, reduced tax collection, expenditure over-run on additional security spending," it said.
In the current fiscal year alone, it said, the war had cost the Pakistan economy $17.8 billion and warned that costs were likely to rise further.