ISLAMABAD - The black economy in Pakistan has grown to be half as big as the formal economy which yields a GDP of $166 billion.
Sources said that the problem had reached such proportions that it was upsetting public welfare plans. The parallel black economy of $83 billion could yield the national exchequer $8 billion if taxed even at the minimum rate of 10 per cent.
"These are very conservative estimates. The fact of the matter is that black economy could be much bigger," an official dealing with economic affairs said.
"Pakistan's economy is largely undocumented, providing space to informal sector to grow and thrive. "Under-invoicing has gone on for years and at a huge scale," he said.
Most recently hoarders and blackmarketeers earned billions in wheat and flour trading but no record was available to pin them down, the official added.
The government is believed to have taken a serious view of the situation and thought of proposing punitive measures during pre-budget exercises but dropped the idea as it would have sent a wrong signal to the market. Instead it decided to offer incentives that would gradually merge the black economy into the formal economy.
"This approach is no different from that adopted by former economic managers, headed by Shaukat Aziz, who first launched documentation of the economy in 2000-01 but abandoned it on the same excuse in the name of being "business-friendly", a source said.
Sources said that a strategy is being finalised to bring the informal sector into formal one aimed at achieving new resource mobilisation particularly by encouraging the development of cottage industry across the country.
The officials of the economic ministries have been directed to give an implementation mechanism to substantially raised revenues by providing more incentives to the informal sector to merge into the formal sector.
M Abdullah Yusuf, Secretary General Revenue Division and Chairman of Federal Bureau of Revenue (FBR), when contacted said that there were different estimates about the size of the black economy.
"But I believe this black economy is 30 to 40 per cent of our total economy and this is quite disturbing," he said.
"There is substantial part of the informal economy which is not in the main stream economy and needed to be documented if at all new resources are to be mobilised for welfare purposes," the chairman FBR said.
Serious efforts, he pointed out, would be made to formalise informal economy and encourage them to come forward and disclose their incomes under Universal Self Assessment Scheme.
He was of the view that non-documentation of economy is the main reason behind the growth of black and under ground economy.
Some decisions, he said, were required to convert cash based economy into documented economy to have level playing filed for every one to grow.
Sources said that the problem had reached such proportions that it was upsetting public welfare plans. The parallel black economy of $83 billion could yield the national exchequer $8 billion if taxed even at the minimum rate of 10 per cent.
"These are very conservative estimates. The fact of the matter is that black economy could be much bigger," an official dealing with economic affairs said.
"Pakistan's economy is largely undocumented, providing space to informal sector to grow and thrive. "Under-invoicing has gone on for years and at a huge scale," he said.
Most recently hoarders and blackmarketeers earned billions in wheat and flour trading but no record was available to pin them down, the official added.
The government is believed to have taken a serious view of the situation and thought of proposing punitive measures during pre-budget exercises but dropped the idea as it would have sent a wrong signal to the market. Instead it decided to offer incentives that would gradually merge the black economy into the formal economy.
"This approach is no different from that adopted by former economic managers, headed by Shaukat Aziz, who first launched documentation of the economy in 2000-01 but abandoned it on the same excuse in the name of being "business-friendly", a source said.
Sources said that a strategy is being finalised to bring the informal sector into formal one aimed at achieving new resource mobilisation particularly by encouraging the development of cottage industry across the country.
The officials of the economic ministries have been directed to give an implementation mechanism to substantially raised revenues by providing more incentives to the informal sector to merge into the formal sector.
M Abdullah Yusuf, Secretary General Revenue Division and Chairman of Federal Bureau of Revenue (FBR), when contacted said that there were different estimates about the size of the black economy.
"But I believe this black economy is 30 to 40 per cent of our total economy and this is quite disturbing," he said.
"There is substantial part of the informal economy which is not in the main stream economy and needed to be documented if at all new resources are to be mobilised for welfare purposes," the chairman FBR said.
Serious efforts, he pointed out, would be made to formalise informal economy and encourage them to come forward and disclose their incomes under Universal Self Assessment Scheme.
He was of the view that non-documentation of economy is the main reason behind the growth of black and under ground economy.
Some decisions, he said, were required to convert cash based economy into documented economy to have level playing filed for every one to grow.
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