Tax compliance rate should be raised, seminar told

A former official of Federal Board of Revenue (FBR) has claimed that informal sector is paying much less tax than the documented sectors of the economy, which is major reason of ever-increasing budget deficit. Dr Ather Maqsood, who is presently teaching in NUST, said that the taxes compliance rate is very poor, eg, Islamabad and Rawalpindi, where most of the salaried class live pay more taxes than Gujranwala, which is hub of manufacturing sector in the country.
Speaking at a seminar on 'pre-budget consideration for revenue, expenditure and deficit management' organised by Pakistan Institute of Development Economics (PIDE), he said we should make efforts to stabilise exchange rate otherwise the cost of borrowing will increase with each passing day.
He also recommended that the government limit its expenditure by addressing the issue of disguised unemployment and making structural reforms increasing share of manufacturing sector to about 30 percent of GDP. He stressed the need for enhancement for tax to GDP ratio by identifying the areas, which are earning heavily and are still out of the tax net. "Without bringing those sectors, which are not paying their due taxes, the country can not be economic stable and prosperous", he added. .
Dr Rashid Amjad, VC PIDE stressed the need to stabilise the economy through increase in development expenditure and completion of ongoing projects rather than starting new projects. He called upon the government to give better incentives to the tax payers of the country as it will help in improving tax system. "The tax payers should be provided visible services like better health, safe drinking water and infrastructure", he added.
Dr Ashfaque Hasan Khan, dean NUST pointed out that in contrast to the general perception the defence budget is now 12 percent of GDP, whereas the interest payments has increased up to 25 percent of GDP. He suggested that the size of PSDP should be consistent with macro-economic structure. "Funds should also be allocated for maintenance for physical infrastructure and third party validation should be made for public sector development projects," he stressed. He also recommended that tax compliance rate should be increased rather than broadening the tax base.
Mohsin Khalid, former ICCI president suggested that corporate taxes should be reduced from 35 percent to 25 percent. Dr Akhtar Hussain emphasised the role of incentives for tax payers by reducing tax rate and simplifies the payment procedures. The seminar was attended by professionals and students from various universities of Islamabad.