By Arsalan Ali ISLAMABAD, May 30 (INP WealthPK): A report by Pakistan’s premier economic development body has called for prudent tax reforms to help enhance the country’s investment-to-GDP ratio. Pakistan had the lowest investment-to-GDP ratio during the last two decades in stark contrast to over 30% of Sri Lanka and India and 40% of China, according to the report published by the Pakistan Institute of Development Economics (PIDE), reports WealthPK. [caption id="attachment_67634" align="aligncenter" width="696"] Source Pakistan Institute of Development Economics[/caption] According to the report titled ‘Business and Investment Issue in Pakistan’, frequent changes in taxes and the lack of trust in public policies have kept the country at low investment levels. As a result, the country is unable to attract foreign investment. The report noted that policies in past aimed at nationalisation damaged the business attitude. The report highlighted that the tax system is not virtuous as the role of Federal Board of Revenue is considered provocative. Many barriers to entering the market do exist because the policies are not supportive of the business industry. The tax policy is burdensome and complicated, and taxes are revised every year to meet unrealistic targets, it further added. According to the report, Pakistan has also lost its advantage in international trade by continuing to depend upon low-tech products, while private sector players have attuned themselves to new realities of global markets. It noted that favourable trade and investment policies could contribute to the growth dynamics. The report highlighted that ‘self-centered’ policies were hurdles to growth in domestic investment, including in retail. “Stock market is weak, efforts aimed at stabilisation do not work and construction activity is not supported. Hence, it noted that without allowing domestic commerce under mercantilism, foreign investment cannot be attracted. The PIDE report pointed out that short-term goals of the tax machinery and corruption hurt the businesses and discourage investments. It also highlighted that inconsiderate policies and non-implementation of intellectual property laws crimped business growth. The report also noted that start-ups faced problems in registering themselves outside Pakistan as risk-taking and innovation were not ‘in our culture’. The report emphasised there must be a platform to get start-ups registered swiftly both inside and outside Pakistan. The report noted that Pakistan’s economy was a “politically captured economy as cartels were formed by businesses to get market power and further exploitation”. “These cartels are not willing to use the equity market for growth and remain too focused on protecting their businesses. In this scenario, the informal economy grows by staying out of formal structures,” the report further noted. The PIDE report pointed out that Karachi, Lahore, Faisalabad and Sialkot were the main industrial centres having the potential to provide investment opportunities. “The sea routes in Sindh and Balochistan have the potential to contribute to economic growth through business development,” it noted. The PIDE study recommends the following steps to increase the investment opportunity in Pakistan. Firstly, tax reforms are direly needed as onerous and expansive tax policies have failed to bring business and people into the tax net. Secondly, the equity market should be encouraged for the growth of businesses. Thirdly, industrial groups should be formed for attaining competitiveness. Lastly, the confidence of domestic, international investors and financial institutions should be restored in the domestic policies.