With one of the highest rates of illegal commerce in Asia, Pakistan’s legitimate economy is being undermined and substantial tax income is being lost. 20% of the formal economy is reportedly made up of $68 billion from smuggling, under-invoicing, misreporting imports, counterfeiting, and adulteration, according to the Pakistan Business Council (PBC), a policy advocacy group that represents the biggest companies in the nation.
The size of the unofficial economy, which is exempt from tax laws, is quite similar to that of the official economy. As such, 10% or so of the economy is comprised of illicit transactions, according to the PBC.
According to the council, the yearly tax losses resulting from illicit trade amount to Rs8 trillion, or 85% of the tax collection objective for the fiscal year 2023–2024. Beyond the loss of tax revenue, illicit trade hinders the official industry.
