PM Speech: Claims Vs Reality

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In a country where the tenure of the Prime Minister is marred by uncertainty with each passing dawn, his recent address to the nation ignited a sense of anticipation and determination. Amidst the intricate web of fiscal negotiations, he boldly proclaimed that the forthcoming program of the International Monetary Fund (IMF) would signal the culmination of Pakistan’s reliance on bailout packages. As discussions unfolded for a loan ranging between US$6 billion to US$8 billion to forestall economic turbulence, his words resonated with resolve and foresight. This seminal speech, his first since the unveiling of the federal budget for the fiscal year 2024-25, accentuated Premier Shehbaz Sharif.s unwavering commitment to economic self-sufficiency.

By citing nations that sought IMF assistance only once and never again, he painted a vivid picture of the country’s potential for autonomy. “We have knocked on the IMF’s door 24 to 25 times”, he declared steadfastly, “yet today, I affirm that if we remain resolute in our program and objectives, this shall mark the final chapter of IMF interventions in Pakistan’s narrative”. With fervor, he envisioned Pakistan surpassing stability, propelling the nation towards unparalleled prosperity, outshining even its closest rivals.

In order to maintain fiscal balance, he also pledged to abolish all the institutions, ministries and other departments which instead of contributing anything positive are proving a burden on the national exchequer. He referred to the Public Works Department (PWD), labelling it the “most notorious” for corruption and criticised the department’s perks and privileges, emphasising that their salaries alone amounted to no less than Rs 2 billion annually. 

He further pointed out that the funds PWD receives from various ministries and departments for developmental works are several hundred billion rupees and lamented that if the department had a pool of a hundred billion rupees for developmental funds, then 50% or more was claimed by corruption. To handle this issue, he announced the formation of a ministerial committee, promising positive results within a few months. This move, he assured, would not only save billions of rupees but also mark a significant milestone on Pakistan’s path to prosperity. 

Furthermore, the Prime Minister revealed that one of the world’s top companies had been engaged to fully digitise the Federal Board of Revenue (FBR), besides sidelining inefficient personnel within the organisation. 

However, the Prime Minister’s claim appears contradictory to his government’s actions. In the recent Finance Bill for 2024-25, the proposed insertion of Section 3CCE aims to establish the Directorate General of Trade-Based Money Laundering within the Customs Act, 1969 (IV of 1969). This new directorate, comprising a Director General and numerous Directors, Additional Directors, Deputy Directors, Assistant Directors, and other officers, seems designed to accommodate bureaucrats while imposing an additional burden on the national exchequer.

The government instead of creating a directorate to counter trade-based money laundering should use technology to counter this crime without straining the national exchequer; the government should implement a series of strategic, technology-driven steps including digitisation of trade processes to ensure transparency and traceability of transactions to reduce opportunities for illicit activities. 

Integration of blockchain technology can provide a tamper-proof record of trade documents and transactions. Additionally, automation of trade monitoring systems using AI and machine learning will help detect suspicious patterns and flag potential money laundering activities. Streamlining of customs procedures through electronic platforms will minimise human intervention and errors. Enforcement of stringent regulatory frameworks supported by advanced analytics can enhance compliance and oversight. By leveraging technology in these focused ways, the government can effectively counter trade-based money laundering while ensuring fiscal responsibility.

Moreover, financial inclusion and thorough documentation of the economy are critical in countering trade-based money laundering. By integrating more individuals and businesses into the formal banking system, financial inclusion ensures transparency and traceability of transactions, reducing opportunities for illicit activities. Therefore, the government needs to devise a comprehensive policy to documentation of the economy to accurately monitor and regulate the trade activities, making it harder for money laundering to go undetected. These processes can be effectively overseen with the existing human resources. Creating an additional directorate would only impose an unnecessary burden on the treasury.

The Prime Minister in his speech also highlighted the economic challenges faced by his government and shared the achievements during his first hundred days to stabilise the economy. He took the credit for improving inflation, which dropped from 38% to 12% and the policy rate reduced to 20.5% from 22%. He pledged further measures to provide relief, reduce inflation, expand investments, and create higher education opportunities for youth. He also shared the outcome of his international visits and emphasised establishing a system to benefit from foreign investments and creating a favourable investment environment. He announced plans to train 300,000 Pakistanis in information technology in collaboration with China and expand the country’s IT infrastructure.

Shehbaz Sharif condemned the disparity where the elite live lavishly while the salaried class is burdened with taxes. However, the prime minister apparently ignored how his finance minister burdened the salaried class in the current budget 2024. Unfortunately, the new Finance Minister has once again turned to taxing those who are already burdened with taxes. Despite claims to reduce the load on heavily taxed segments, this has proven to be mere rhetoric, as they have opted for the conventional method of squeezing the already taxed community. 

In pursuit of increased revenue, tax rates for non-salaried individuals, associations of persons, and salaried individuals have been revised. For salaried individuals earning above Rs. 600,000 annually, there are now five taxable slabs, ranging from 5% to 35%, imposing additional tax burdens. 

Similarly, the maximum tax slab for non-salaried individuals has been increased to 45%, while corporate entities face an already high tax rate of 39%, comprising a 29% corporate tax and a 10% super tax based on income levels.

The significant hike in taxes for the salaried class and small businesses is poised to diminish public purchasing power and impede economic growth. While the government’s proposal to tax exporters at standard rates appears rational, as differential rates have led to a parallel economy, the Prime Minister in his speech apparently neglected to share the structure of his foreign policy and ignored to highlight his strategy regarding relations with neighbouring countries, which share cultural ties and could help in boosting exports. Additionally, there was no mention of the government’s strategy to enhance trade with China or plans to amend existing trade agreements to benefit Pakistani exporters and investors.

Pakistan needs to realise that foreign policy is the key to attract investment, boost trade and improve the GDP growth. Pakistan has been struggling since last decade on the foreign policy fronts. It is the right time for us to appoint a seasonal foreign minister and devise a prudent foreign policy with the single purpose of attracting investment and boosting trade with neighbouring as well as friendly nations. The passive approach to the foreign policy end will not help the prime minister to achieve the goal he promised in his speech.

 

Dr. Ikramul Haq and Abdul Rauf Shakoori
Dr. Ikramul Haq and Abdul Rauf Shakoori
Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886–2011 (with judicial analysis). He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad. Twitter: DrIkramulHaq _________________________________ Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC). Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer. His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others. His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy — Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices . Twitter: Adbul Rauf Shakoori The recent publication, coauthored by these writes, is Pakistan Tackling FATF: Challenges & Solutions, available at: https://www.amazon.com/dp/B08RXH8W46 and https://aacp.com.pk/

1 COMMENT

  1. In his speech, Minister Shehbaz Sharif tried to showcase a vision of economic self-sufficiency and painted a hopeful picture of Pakistan’s future. However, his rhetoric sharply contrasts with his administration’s actions. The Finance Bill for 2024-25, which burdens the salaried class and imposes new taxes on the poor, directly contradicts his claims of reducing financial strain on the populace. The authors have clearly identified this troubling disparity between PM’s words and actions.
    This inconsistency, along with the PM’s past history and perceived public image, erodes public trust and undermines his proclaimed commitment to economic reform and fairness. Dr. Ikramul Haq and Abdul Rauf Shakoori have aptly mentioned these glaring contradictions, highlighting the disconnect between the Prime Minister’s speech and the tangible impact of his policies.
    An excellent read.

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