Advisor to the Prime Minister on Finance, Revenue and Statistics Shaukat Tarin on Thursday said that Pakistan needs to have an equitable, simple and transparent tax system executed in professional manner. He said it should be a broad-based tax system administrated properly.
"It should be devised in a manner in which each and every Pakistani should share the burden instead of burdening some people who will ultimately find ways of not paying those taxes," he added. He admitted that revenue target fixed for the current fiscal year was tough but said there were many people in our country who were not paying taxes and if the department could tap only 10 to 20 percent of them, there would be no difficulty in meeting the targets.
He expressed these views while summing up the debate at a three-day moot arranged by the Federal Bureau of Revenue (FBR) on 'Tax Policy Options for Pakistan'. FBR Chairman Ahmad Waqar, former Commerce Minister Hafeez Pasha and Dr Ehtisham Ahmad from the IMF also presented the crux of views expressed by different speakers in different technical sessions during last two days.
Tarin said we have to move in the direction in which most of the developing and developed countries have moved and learn from their experiences. He said we have to review our GST system and re-write the things if needed. "On the reforms sector, the FBR had done many good things such as introduction of Self-Assessment Scheme (SAS) or reforms process itself but we need to give this process a final push to get the desired results," he told the delegates.
He stressed the need for continuing the consultative process, which was initiated with the holding of this seminar and observed that it would help the FBR to move forward. "All of us have to pay taxes. Income Tax is a tax but we have to pay taxes on goods and services and these should be taxed on consumption basis," he added.
Tarin urged the FBR officials to look what the world was telling them. He said it was an autonomous body and it should put in efforts to earn more. He said the government was even ready to share some part of the collected amount to be spent on the administration of the department or for compensation of the employees. "The department people had to start thinking differently and fill the cracks in revenue collection as nobody from outside could help in this regard," he added.
He observed that increase in revenue generation was the need of the country, as without it we could not ensure a sustainable economic growth. FBR Chairman Ahmad Waqar in his brief speech replying to observations of different speakers said that the revenue target set for the current fiscal year was difficult. He said they would be looking at the tax collection of December and then after evaluation would take any decision for upward or downward revision in January 2009. He also said there was also a consensus for integration of domestic taxes, ie, GST and income tax; reform process was also taking care of this aspect. "There was need to make the FBR more vibrant and effective in compliance issues," he added.
Former commerce minister and one of the members of a panel of 18 economists set up by the government on tax reforms, Dr Hafiz Pasha, giving the crux of various short-term and long-term steps proposed by the domestic and international experts said that revenue growth target looks very ambitious keeping in view the downturn in the country. He ruled out any reduction in tax rates and proposed rationalisation of Petroleum Development Levy (PDL) into excise duty and temporary imposition of Regulatory Duty (RD) on import of non-essential items. He said no such measures should be taken that could disrupt the economic activities. "Revenue target might be scaled down. December was the crucial month traditionally as far as revenues are concerned and the department should show some flexibility in the target in the light of December results," he added.
For increase in revenue generation, the speakers also proposed excise duty on services and expanding provisional sales tax on services, Self-Assessment Scheme (SAS) needs to be re-enforced with random audit mechanism and improved compliance in corporate income tax. He said tax-to-GDP ratio should be fixed at 1.5 percent and caution should be exercised in revenue forecasting.
Dr Ehtisham Ahmad from the IMF said that Pakistan was going through difficult times. He said for the past 20 years revenue generation was inadequate, which led to vulnerability. He called for ensuring additional revenue generation in an efficient manner by tapping local resources. "The system should be friendly to business climate.
The revenue target was difficult in prevailing circumstances and the government should ensure that the short-term measures do not mingle with medium term measures and not jeopardise the revenue collection," he added.
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