According to Reuters,less than one per cent of Pakistani citizens file tax returns, giving the country a 9 percent tax-to-GDP ratio – one of the lowest in the world.
The Express Tribune reports that the cost of corruption to Pakistan’s economy amounts to $133 million per day, $66 million of which is evaded taxes. This endemic tax evasion has encouraged a race to the bottom. As Umar Cheema, the author of the CIR report complains, “if politicians don’t pay taxes themselves, they [lose] the moral authority to impose taxes on others.”
Rampant corruption threatens to undermine the flow of billions of dollars of investment and aid into the country. Combatting corruption is one of the conditions of a $6.7 billion IMF aid programme, and there are reports that major donors, such as the UK, are
reconsidering their aid commitments in light of the country’s persistent failure to combat corruption. Pakistan’s energy sector has had funds leeched out of it, resulting in an energy crisis that is stunting the country’s economic growth. Deep distrust of Pakistan’s policy elite and concerns over security have
further eroded investor confidence. With an ailing economy, Pakistan’s government can ill afford to allow these streams of finance to dry up.