Pakistan grapples with untaxed Eid activity worth Rs500bn

June 20, 2024 (MLN): Eid-ul-Azha generated economic activity of over Rs500 billion in Pakistan, but its contribution to the country’s treasure or revenue remains nearly negligible, as almost all activity has remained undocumented or, we could say, tax-free.

According to media reports, the Pakistan Tanners Association issued a statement that over three days of Eid, more than 680,000 animals were sacrificed in the country, valuing over Rs500bn.

These reports further detailed that these sacrificed animals included 290,000 cows, 330,000 goats, 385,000 sheep, 165,000 water buffalos and 98,000 camels.

Apart from the trend observed in these figures, the key question that comes to mind is whether it benefitted the nation's economy.

As taxes are the dominant source of revenue for the government and considering the current tax-burdened situation in the country, it is important to draw attention to the fact that a significant portion of these transactions have remained untaxed.

This means that despite substantial economic activity in the country, the government has failed to capitalize on it as the majority of the livestock holders booked massive profits while remaining unregistered.

During these three festive days, butchers, livestock sellers, food sellers, and transportation individuals made massive amounts of money by operating solely in cash to remain shielded from taxes.

Pakistan has been in a fiscal tightening phase for quite some time, facing consecutive fiscal deficits and relying on borrowing from domestic, multilateral, or bilateral sources to bridge this gap.

Moreover, the recently announced budget for the upcoming fiscal year (FY25) sets higher taxes on the salaried class, increased levies, enhanced FED, and revamps of various tax rates and their computations.

The goal here is to shrink the fiscal deficit by achieving a 40.2% higher tax revenue of Rs12.97 trillion, compared to the revised estimates of Rs9.252tr for the current fiscal year (FY24).

Therefore, once again, the burden falls on economic sectors, which face heavy taxes or the elimination of exemptions to bridge this deficit.

While the government is making considerable efforts to bring non-filers into the tax net by restricting their exit from Pakistan, there are other sectors, such as livestock, that require even more attention.

Instead, if they had been brought into the tax net, billions would have been generated which could have been used to bridge the fiscal deficit or to provide certain relief to the ever-demanding industrial sectors.

Hence, this calls for immediate action to be taken by the Federal Board of Revenue (FBR) by tapping into this sector by issuing strict tax regulations.

A few years ago, there were rumors that the revenue board had introduced strict taxes for the livestock sellers during the festive season and planned to strictly monitor the overall activity.

However, these rumors faded away with time, but now it has become necessary for the government to generate revenue from these untapped areas and provide relief to other segments.

This might result in a negative consequence for the public as the already cloud-touching prices would escalate further, but it would improve overall transparency in the economy.

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