Central Board of Revenue (CBR) Chairman Abdullah Yusuf said here on Wednesday that a strategy was being evolved to enhance tax-to-GDP ratio from 10.5 percent to 15 percent which is currently lowest in the region, and added that introducing third-party information system and enlarging the tax base was inevitable to pave the way for reducing tax rates in future.
He was addressing Lahore Chamber of Commerce and Industry (LCCI) executive committee members and office-bearers. He asked the businessmen to help in expanding the tax base and the government would reduce the tax rate.
He said that the oil and gas sector was contributing highest, ie 26 percent, to the taxes, while banking sector contributes 16 percent and telecom sector has a share of 8 percent, meaning thereby that half of total taxes collection was coming from only three sectors, whereas other sectors have negligible share of about one percent.
He said that there was a huge potential in other areas, which could help in enhancing tax collection "and we are working on it". He said that the country had witnessed different phases of fast economic growth which, unfortunately, lasted for short term and could not be sustained. As a result, the tax-to-GDP ratio had become stagnant and a barrier.
He said that high saving rate, and subsequent high investment rate, were vital for high economic growth, which also could help in enhancing the country''s share in the exports market. He was of the view that investment in research and development was very low, at 0.3 percent to GDP, and needed to be enhanced.
About under-invoicing, Yusuf said that China "is not only a problem for Pakistan but has also become a problem for every country" including America. He said that China was setting up industrial/economic zones in eight countries, including Pakistan, and 3000 acres land has also been identified at Kala Shah Kaku, near Lahore. China would set up diversified production units at this economic zone, which would help eradicate the under-invoicing issue.
The CBR Chairman urged the industrial community to opt for mergers of small industries for the benefit of scale of economy to make their production more economical and get rid of their problems by enhancing management, efficiency and labour productivity which are the main problem areas in the country. The logistics cost is also a matter of concern, for which the government was setting up ''National Trade Corridor''.
"We are also trying to put certain systems to ensure efficient and transparent clearing at the ports. We have already reduced the clearing time and have also set the target to upgrade the system like Singapore, which takes only 10 minutes for clearance of import and export consignments, Yusuf said.
The CBR Chairman ruled out any compromise on the audit issue, saying that "it is a global norm" to check tax evasion. "CBR is also going to introduce an audit system which would not be misused for exploitation of taxpayers or create harassment among them. We want our taxpayers to be more comfortable, but there is lack of trust and confidence on both sides."
Quoting the competitiveness report recently submitted to the Prime Minister, he said that the private sector was driving the reform process in India, and the government lags much behind, whereas in Pakistan, the government is driving the reform process and the private sector is far behind, in this regard.
"Now, we have been exposed to the world, and have to survive in the environment of competition. Thus, we must move towards reorganising and restructuring, to face the future challenges," he added.
He said that CBR was setting up 60 to 70 tax facility centres (TFC), which would provide all kinds of necessary services to the taxpayers of small cities of the country. "We have reduced the income tax rate to 35 percent; the interaction between the tax officials and taxpayers has been eliminated by introducing self-assessment scheme. We want similar system for other forms of taxes so that the tax officials may not exploit the taxpayers," he added. Earlier, LCCI President Shahid Hassan highlighted a number of issues including under-invoicing, cut in rate of duty on raw materials, sales tax audit, sales tax registration, property tax and elimination of tax on research and development.
He said that under-invoicing on large scale was prevalent in trade with China, Dubai and Thailand, which is causing a loss of Rs 40 billion to the exchequer. He said that despite the fact that government had signed an agreement in this regard with the Chinese government, the menace of under-invoicing was still there.
He demanded of the CBR Chairman to bring down the rate of duty on raw materials as the local industry was suffering because of high duty on imported raw materials.
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