Managing the unofficial economy in Pakistan is difficult due to lack of documentation and record-keeping. This makes it hard for the government to track business activity, enforce tax laws, and provide financial services to informal workers. The informal sector makes up the majority of non-agricultural jobs, with more people working in rural areas than urban areas. Tax avoidance by informal workers prevents government funding for public goods and services, and informal workers have limited access to labor welfare services. Pakistan’s complex regulatory framework discourages informal businesses from becoming formal. To regulate the informal economy, Pakistan needs comprehensive strategies such as investing in data collection, promoting financial inclusion, simplifying tax procedures, improving social safety nets and labor safeguards, and increasing public awareness. Other countries have successfully regulated their informal economies through measures like simplified tax systems, regularization programs, and microfinance organizations. Legalizing the informal sector requires a holistic approach that considers different economic sectors and all informal workers and businesses. It is important to adapt strategies to Pakistan’s specific conditions and understand that formalizing the informal economy is a long-term process. The government can make progress by implementing a systematic and sustained approach.

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By hassani

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