Tuesday, October 20, 2020  | 2 Rabiulawal, 1442
Samaa TV
Facebook Twitter Youtube
HOME > Money

Karachi’s Saddar, Jodia Bazaar pay more tax than Lahore, Islamabad markets

SAMAA | - Posted: Sep 21, 2020 | Last Updated: 4 weeks ago
SAMAA |
Posted: Sep 21, 2020 | Last Updated: 4 weeks ago
Karachi’s Saddar, Jodia Bazaar pay more tax than Lahore, Islamabad markets

A labourer drags his loaded cart on a street near a market in the Pakistan's port city of Karachi on June 11, 2020. Photo: AFP

Karachi is an economist juggernaut as clearly evidenced by the recently published taxation statistics released by the Federal Board of Revenue which further validate the immense scale at which the city operates.  
As Pakistan’s economic hub as well as the primary port through which trade flows, the city collects an array of taxes—from import and custom duties, to corporate taxes from entities operating all over the country. Naysayers often argue that such taxes should not be counted as Karachi taxes, but I find this counter-intuitive as the presence of a base-level infrastructure is required to support throughput of trade and commerce of a country, and that infrastructure can only be maintained if taxes are collected and spent on its upkeep.

Just income tax data
To address such concerns, however, we can disaggregate taxation data to assess how much Karachi collects from its own markets and retailers. This is data on business within the city and excludes any other taxes (corporate, import etc.) that may be collected as a consequence of it being a port city.  
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.

Just number of tax filers
Karachi also has the largest number of tax filers: in excess of 134,000, compared to 117,493 for Lahore, and only 8,084 for Islamabad. Average income tax paid by markets and retailers in Karachi was double what was paid by Lahore, and almost thrice the national average. This is just pure income tax generated by businesses in Karachi, who are potentially more tax compliant than the rest of the markets in the country.
If the average effective tax rate is considered a proxy, then markets in Karachi generated pre-tax income of more than Rs415 billion, which would have crossed more than half a trillion rupees by 2020. This is also at the lower end of the estimate, as massive tax evasion continues to exist—but is somehow still lower than that of the rest of the country if average tax paid, and number of filers is considered.
The market with the highest pre-tax income in the country is Saddar with a turnover of at least Rs309 billion, followed by Tariq Road at roughly Rs19 billion, and Jodia Bazaar at Rs11 billion.  If we add sales tax contributed by these markets, the tally would be much higher.

Anecdotal evidence suggests that the numbers reported are considerably lower than actual amounts. For certain markets it can be seen that average tax paid is fairly low, and does not align with overall economic activity of those markets. Notable in this case are Zainab Market, Bohri Bazaar, Lee Market, Sarafa Bazaar, Liaqatabad, Jama Cloth, among others.

It could be higher
There exists a case for rationalizing income tax levels through proper reporting, but considering the dilapidated infrastructure and absolute apathy demonstrated by both the federal and provincial authorities in improving and investing in Karachi’s infrastructure, the incentive to declare higher income levels, and pay higher taxes is simply not there.

In the absence of base-level infrastructure, enabling reliable access to transportation, roads, electricity, water, healthcare, and other facilities, as well as security, individuals and businesses alike have to pay for them from their own wallet. The complete failure of both the federal and provincial authorities in assaying concerns of businesses and individuals in the city further discourages any additional tax compliance.

The markets in Karachi alone pay enough income tax annually to enable heavy investment in infrastructure and service delivery, thereby stimulating business activity, and ensuring enhanced tax compliance. An apathetic attitude towards the city’s problems, will further alienate individuals and businesses contributing to its economic vibrancy, while also hurting overall economic activity of the country at large.

Karachi Transformation Package
The Karachi Transformation Package which pegs investment at Rs1.1 trillion is a step in the right direction, but its implementation requires more than simply notifications, photo ops, and tweets. It requires political will and fiscal space with the latter possibly being arranged through reallocating all income taxes generated by markets and individuals operating in Karachi for the upkeep and investment in its infrastructure. Unless such a radical move is made, executing a trillion-rupee project would be like spotting a rainbow on a hot summer day in Karachi, i.e. impossible.

The writer is an economist @rogueonomist

FaceBook WhatsApp
 
HOME  
 
 
RELATED STORIES

Tell us what you think:

Your email address will not be published.

FaceBook WhatsApp
 

 
 
Karachi, Saddar, Jodia Bazaar, income tax, taxes, Karachi Transformation Package, PTI, PPP, FBR, trade, economy
 

Monthly Salary

Monthly Tax

Monthly Salary After Tax

Annual Salary

Annual Tax

Annual Salary After Tax


MOST READ
MOST READ
Suzuki Alto 660cc with AC now costs Rs1.43 million
PIA flights to resume to England from October 30
Pakistan’s first ever public electric bikes launched
All you need to know about Canada’s Express Entry visa
Dollar drops below Rs163 for first time in 20 weeks
A cool investment tip that can make you richer
Joblessness in Pakistan to reach 30-year peak in 2021
Honda, Suzuki motorcycle sellers charging ‘own money’
Pakistan records its highest-ever bike sale in first quarter
Pakistan’s dollar reserves at a 15-week low
 
 
 
 
 
About Us   |   Anchor Profiles   |   Online Advertising   |   Contact Us   |   Feedback   |   Apps   |   FAQs   |   Authors   |   Comment Policy
Facebook   |   Twitter   |   Instagram   |   YouTube   |   WhatsApp