Black Market Activities And Corruption In Pakistan Politics Essay

Black Market Activities And Corruption In Pakistan Politics Essay The relationship of corruption and Governance is integrated from a long time back. In case of Pakistan, the root of the relationship runs back since the Independence Day. Corruption as an attribute in the system in the sub-continent, has affected the level of Governance to the extent of creating extremities of positive and negative. Governance which measures the effectiveness of institutions in a society has only been a theoretical concept in case of Pakistan. Several factors that lead to the level of corruption to reach where it is now are ignored conveniently and the direct effect is on the masses. A number of activities are performed below the radar in Pakistan and are reported to as the â€Å"black market activities†. They are referred so as because of their capability to deceive the purposeful boundaries of the system present, which holds them liable to the tax structure of the country. The case is not a new one for the world, let alone for Pakistan, and this is a common practice in the country. All these activities are concealed from the authorities with regard to the tax structure in Pakistan, and are thus reported as the under-ground economy in macro terms. This is a consequence of a complex tax system, frequent cash transactions in terms of construction, smuggling etc. and that of a negative public perception. Pakistan has experienced a relatively below par appreciation when it comes to the structure of the taxing system present, and the flexibility in it. Unemployment and recessionary trend also contribute towards a most common phenomenon as part of black activities known as â€Å"tax evasion†. This concept has given birth to corruption on a wide scale. Tax evasion is when one skips the underlying rules of the system and is not officially recorded in the tax net. Some sectors of the economy in Pakistan have been exempted from taxes right from the independence till date, and hence they are also recorded as the underground economy. The ot hers, who happen to be the industrialists in some cases, have taken refuge under the same exemption by reporting their income either as under the exempted sectors or by understatement altogether. This has given rise to corruption not only by these means, but also by persistently supporting and influencing the policy making process so that loop holes remain to be exploited. The theoretical side of this aspect has confirmed that the persistent non-compliance towards tax laws have allowed a major portion of the economy to remain below the radar so that they can skip the measurement as per the economy’s activities. The graph relates to the overall black economy as a percentage of GDP and then tax evasion as part of the GDP Source: Pakistan Institute of Development Economics, Islamabad (PIDE Research series) The increasing trend in the black market activities from as early as year 1974 till the start of the 21st century is in line with the theory and also points out towards the fa ct that in Pakistan, the complex and flawed policies to account for a major chunk of the economy have decreased on standards year by year. The tax evasion figures also shed light upon the loop holes of the tax policy