American Business Council of Pakistan (ABC) has submitted its taxations proposals for Federal Budget FY16-17 to the Federal Board of Revenue highlighting the need for procedural changes in the collection system. The comprehensive document issued by the country's largest single country chamber of commerce includes tax proposals for various sectors of the economy.
The ABC has also urged the government to widen the tax net and ensure that all sectors of the economy are taxed appropriately. With Pakistan having one of the lowest tax to GDP ratios in the world, it is imperative for the government to identify new sources of revenue.
"The ABC strongly advocates that the most important focus of the government should be to undertake meaningful reform that will substantially increase revenue collection. More importantly increased tax collections should be made from those who have so far kept themselves out of the tax net." commented Mr Nadeem Elahi, President ABC. The detailed document prepared by the ABC Finance and Taxation Subcommittee, under the chairmanship of Mr Kamran Nishat, includes proposals for the elimination of 8% minimum tax on services and calls for the applicability of a standard income tax across all businesses. The current minimum tax regime has rendered businesses with margins lower than 8% as unviable. Furthermore the proposal calls for sales tax to fall under VAT mode thereby allowing full adjustment of inputs. The ABC has urged the government to review the taxation structure for salaried individuals as unjustified increases in the tax rate are contributing to an outflow of talent.
In order to promote FDI, the Chamber has proposed that the qualifying period for tax credits under section 65 (D&E) should remain in place without any bindings of time as companies evaluating investment plans in Pakistan will include these incentives in their feasibility plan.
The ABC believes that the legitimate sectors of the economy are disproportionately targeted in the application of tax laws. This problem is further magnified by companies that are openly selling illicit goods and not paying any taxes. The chamber of commerce has urged the government to enforce its laws and regulations on the traders of illicit goods. Illicit Trade, in the form of either smuggled or counterfeit goods, takes tax revenue away from the Government that could have otherwise been spent on the provision of public services. The ABC is of the view that the government must engage in a dialogue with the corporate sector in order to identify solutions that will help tackle illicit trade in Pakistan.
The ABC has asked the government to improve stakeholder participation in the budget process as this will ultimately translate into greater transparency and accountability. "A fair and efficient tax revenue system is essential to the long-term sustainability of public finances in any developing country. Efforts must therefore be stepped up to ensure that the process is participatory and effective in translating government plans into tangible and long term development benefits for the nation at large."said Mr Elahi.
The ABC has 67 members with cumulative gross revenues of US $4 billion and their contribution to the national exchequer stands at PKR 102 billion. Members represent a cross section of sectors including healthcare, financial services, information technology, FMCG, food & beverage, pharmaceuticals, oil & gas and others.-PR
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