Time to slash corporate taxes to boost economy

Fact: Pakistanis are passing through extremely difficult times. Question: Can Prime Minister Imran Khan turn the economy around? Answer: Yes, PM Imran can turn the economy around. After all, he’s the first prime minister in three decades whose personal agenda is aligned with our national agenda. To be certain, our public enemy number 1 is unemployment. 

Here’s why:

Cars: In August 2018, a total of 15,389 units were sold. In August 2019, only 9,126 units were sold. Sales are down by a hefty 40 per cent. Corolla’s sales are down 58 per cent; Honda Civic is down 68 per cent and Suzuki Wagon is down 71 per cent. Honda, Indus and Suzuki directly employ 10,000 and with a job multiplier of eight times for every direct job, the auto sector as a whole employs 80,000 who in return provide for 536,000 (with an average family size of 6.7).

Trucks: In July-August 2018, a total of 1,199 units were sold. In July-August 2019, only 648 units were sold; a sales decline of 46 per cent. Busses: In July-August 2018, a total of 217 units were sold. In July-August 2019, only 160 units were sold; a sales decline of 26 per cent.

Tractors: In July-August 2018, a total of 7,831 units were sold. In July-August 2019, only 5,592 units were sold; a sales decline of 29 per cent. 

Motorcycles: In FY2018, a total of 2.8 million units were sold. In FY2019, only 2.4 million units were sold; a sales decline of 13 per cent. Resultantly, around 15 per cent of the labour force has already been laid-off with more on the way. I hope the government intervenes before that happens.

Embroidery: In Faisalabad, around 4,000 embroidery units are on the verge of collapse. Resultantly, more than 200,000 workers will be left jobless. I hope the government intervenes before that happens.

Petroleum products: In July-August 2018, we imported 1.7 million tons. In July-August 2019, our imports stood at 0.9 million tons; a decline of 46 per cent. This is the most definite sign of a sharp slowdown if anyone was still looking for one.

Universities in Sindh: Quaid-e-Azam University, Sindh University and Sindh Agriculture University have obtained loans from private banks to pay their utility bills and salaries to teachers. Has this ever happened before?

Textile: In July-August 2018, we exported goods worth $2.2 billion. In July-August 2019, our exports stood at $2.3 billion; a growth of 2.3 per cent. The improvement in the current account deficit and the 2.3 per cent increase in textile exports are the only good news to report.

The really bad news is that a million have already lost their jobs over the past twelve months-and if things continue the same way an additional million may lose their jobs in the following twelve months. The other bad news is that around five million Pakistanis have been pushed below the line of poverty over the past twelve months.

Here’s what needs to be done: India is slashing corporate income tax by a hefty 10 per cent to stimulate employment. We ought to do the same – cut corporate tax rates (we have one of the highest corporate tax on the face of the planet). Next; interest rates must also be slashed to stimulate employment. Our top priority right now ought to be employment stimulation.

The writer is a columnist based in Islamabad.

Email: [email protected] 

Twitter: @saleemfarrukh

Originally published in The News