Informal Economy Accounts for Over 35% of Pakistan’s GDP, NA Informed

The Ministry of Finance on Friday informed the National Assembly that the size of Pakistan‘s informal economy is estimated to be 35.6 percent.

The information was shared by the ministry while replying to a question about the share of undocumented sectors in Pakistan’s economy.

However, the ministry said that since there are several methods of measuring the size of the informal economy, therefore, different research studies have reported different results using different data of different variables.

The ministry further informed that efforts are being made to enhance the size of the formal economy. The informal economy could be reduced using different policies. However, a well-structured taxation policy and effective enforcement thereof could play an important role in enhancing the size of the formal economy.

The ministry also presented a series of taxation policies and enforcement measures that are being adopted to enhance the size of the formal economy by bringing potential taxpayers into the tax net.

It said that the policy of higher withholding tax rates for non-filers/non-ATL persons is being adopted to force non-filers and persons operating in informal sectors to file tax returns and to operate within the tax net.

Statutory notices are being issued to enforce tax compliance and to force potential taxpayers to file tax returns. Potential taxpayers are being traced through the integration of all sales outlets of tier-1 retailers with FBR‘s central computerized system.

The policy of implementation of a track and trace system for specified goods (tobacco, cement, sugar, and fertilizer) imported into or manufactured in Pakistan is also adopted to increase the formal size of these sectors.

The Federal Board of Revenue is using a large repository of transactional, asset data, and foreign transaction data to identify potential taxpayers. The entire supply chain from import to retail is being integrated with the FBR system to ensure documentation