Sunday, March 30, 2008

Karachi Peace Essential For Pakistan Economy

The business community in Karachi welcomed the support of the Muttahida Qaumi Movement for the new prime minister Mr. Gillani. Good relations between Pakistan People’s Party and the MQM are considered vital for the business community in Pakistan.

According to Pakistan's Dawn newspaper, Shamim A. Shamsi, president of the Karachi Chamber of Commerce and Industry, urged the new team to revisit economic policy issues and resolve them for the good of the people.

“It was wise of the PPP to take the MQM on board as it is an integral part of the current reality of the province. The decision bodes well for Karachi and therefore the country,” Majyd Aziz, a senior leader of the business community, said.

Peace in Karachi is considered crucial for Pakistan's economic growth and prosperity. According to Wikipedia, Karachi is the financial capital of Pakistan and the biggest port city; it accounts for the lion's share of GDP and revenue. It generates over 65% of the total national revenue (federal and provincial taxes, customs and surcharges. Karachi produces about 42 percent of value added in large scale manufacturing and 25% of the GDP of Pakistan. In February 2007, the World Bank identified Karachi as the most business-friendly city in Pakistan.

Most of Pakistan's public and private banks are headquartered on Karachi's I.I. Chundrigar Road, while most major foreign multinational corporations operating in Pakistan have their headquarters in Karachi. The Karachi Stock Exchange is the largest stock exchange in Pakistan, and is considered by many economists to be one of the prime reasons for Pakistan's 8% GDP growth across 2005. During the 1960s, Karachi was seen as an economic role model around the world, and there was much praise for the way its economy was progressing. Many countries sought to emulate Pakistan's economic planning strategy and one of them, South Korea, copied the city's second "Five-Year Plan" and World Financial Center in Seoul is designed and modeled after Karachi.

In the past, the clashes between the ruling parties and the MQM, Karachi's biggest political force, have resulted in serious economic difficulties in Pakistan. The last several years, however, have seen robust economic growth and a close cooperative relationship between the MQM and the ruling coalition in Islamabad. Any progress toward maintaining a positive relationship between the MQM and the PPP would go a long way in sustaining Pakistan's economy for the benefit of the entire nation.

2 comments:

Riaz Haq said...

Karachi retail markets pay 47% of all retail sales taxes in the country, according to the FBR data reviewed by PIDE economists Idrees Khawaja and Ahmad Waqar Qasim.

https://pide.org.pk/research/new-directory-shows-cities-in-pakistan-are-paying-taxes/

The markets of Karachi generated almost half of the income tax paid by Pakistan’s major markets (Rs. 97 billion – 47 percent). This is despite the limitations of a poor law and order situation and not-so-good civic infrastructure that Karachi has faced for decades; imagine the trading volume and therefore the taxes, if the city is unconstrained. The markets of Lahore and Islamabad pay respectively 20.0% and 19.3% of the total tax collected from the major markets of Pakistan. Karachi-Saddar alone generates an income tax of Rs. 77 billion – 79 percent of the total income tax paid by the markets of Karachi. Even more surprising is the fact that out of Rs. 40.5 billion paid by the markets of Islamabad Rs 39.9 billion (98.5 percent) is paid by the ‘Blue Area market’ alone. These figures give an idea: economic activity occurs in dense and easily accessible markets. Those familiar with these two cities also know that the two markets are easily accessible and dense. The tax directory also gives the number of filers in each market. The average income tax per filer or per entrepreneur in the markets of Karachi is Rs. 0.91 million, while the income tax paid per filer or entrepreneur in the markets of Islamabad is around Rs. 5.0 billion. If, whatever profit the income tax of Rs. 0.91 million reflects, is normal profit and is enough for an entrepreneur to survive in business then clearly the entrepreneurs of Islamabad are reaping excessive profit. Why aren’t more entrepreneurs rushing to get a slice of the fairly large profits which entrepreneurs of Islamabad (especially those doing business in the “Blue Area”) seem to enjoy? The answer could be hidden in Islamabad’s limited retail space: Limited space has made property too expensive in the city. Expensive property represents a barrier to entry. Overcoming this barrier requires a significant capital investment. Peshawar’s Karkhano Market, which is the largest Bara market in the country, generates an income tax of Rs. 5.3 billion. Markets specifically named Bara markets in other cities collectively generate income taxes of Rs. 60 billion. The markets called landa bazzar and kabari market collectively generate Rs. 353 billion. The lesson from these figures is that the informal sector contributes to the economy, so let it exist. Rawalpindi, which has a population of 5.41 million, its markets pay an income tax of Rs. 2.82 billion. On the other hand, Multan, with a lesser population of 4.75 million, its markets pay income taxes of Rs. 6.67 billion (Rs. 3.82 billion more than Rawalpindi). One explanation could be that Multan being the largest and most developed city in South Punjab, its residents mainly shop in Multan. On the other hand, residents of Rawalpindi and various other parts of the country appear to be shopping in Islamabad. These inferences carry worth pondering implications for city development. On corporate front, a total of 44,609 companies filed tax returns paying income tax of Rs. 497 million. 55% of companies paid no tax and 20% paid less than one lac Rupees as income tax. Out of over 44,000 thousand filers, 81% of the total income tax paid by the corporate sector came from just 600 companies. Top 5 tax-paying companies contributed Rs. 60 billion. The 542 companies listed on stock exchange generated income tax of Rs. 198 billion – 98 pc of this came from 150 companies. Out of the 542 listed companies, 147 (27 pc) companies paid no tax. The textile sector with 153 listed companies is the largest sector in terms of number of companies. Ironically, the sector contributes only 3.2% of the total income tax collected on the stock market.

Riaz Haq said...

Karachi’s Saddar, Jodia Bazaar pay more tax than Lahore, Islamabad markets
Enough generated to pay for its infrastructure, facilities

https://www.samaaenglish.tv/news/2132341


Karachi paid more than Rs98 billion if we only focus on the income tax paid by its markets for fiscal year 2017-18. This figure does not include any sales tax, corporate taxes, salaried individual taxes, or federal duties that may have been charged. This is simply the income tax paid by various markets in the city on the income they generated during this timeframe. And so, this income tax from Karachi’s markets and retailers was 2.3 times what was paid in Lahore, and 2.4 times what was paid in Islamabad.

If we disaggregate further, Saddar in Karachi was the largest income tax paying market in the country, dishing out more than Rs77 billion in taxes. Just two major markets in Karachi, Saddar and Jodia Bazaar, paid more taxes than Lahore and Islamabad's markets combined.