The business community has apprehended that Value Added Tax (VAT) regime would result in blockage of refunds due to absence of an effective electronic payment system. Although the representatives of the business community are of the view that VAT is a better way of taxation as it will expand the tax base, the element of the corruption will stay until the FBR ensures across the board implementation.
Talking to Business Recorder, Zahid Maqbool, President of Islamabad Chamber of Commerce and Industry said if the FBR wanted to see the new law successful it should ensure strict enforcement. He said the government has prepared the draft of Value Added Tax (VAT) Act on the instructions of International Monetary Fund (IMF) but has not yet shared the draft with the real stakeholders.
Complaining that the FBR has totally neglected the stakeholders on VAT, he urged the government to gradually reduce VAT rate from 15 to 10 percent in two to three years. Zahid said the FBR should start a countrywide awareness drive for introducing VAT and it should utilise all the available means in this regard. For the success of the system, the FBR should first provide proper training to officials involved in collection of taxes as most of them are not familiar with this new taxation method, he added.
He however, argued that at present the economy was not in a position to afford new experiments and business community feels that instead of introducing a new tax law, the scope of existing law be extended to the untapped sectors. Riaz Ahmed a taxation expert was of the view that the government will not be able to extend the scope of VAT encompassing all segments of business without the co-operation of the business community, hence all stakeholders should be taken on board to successfully implement VAT.
He said globally the VAT was introduced gradually after giving proper education to the masses, but in Pakistan the authorities have introduced the system in haste. The literacy rate is one of the key hurdles in the documentation of the economy. In Pakistan it is at its lowest in comparison with all the other countries where it is in practice. Ironically the fate of VAT on export-oriented industry was also not clarified by the Federal Board of Revenue in spite of the fact that only two months are left in the upcoming budget.
The export sector usually book future contracts from international market for the next six months, hence they need to be well aware of the upcoming policy of the government otherwise any sudden change could hamper their commitment.
However, he expressed fear that any such adventure of discontinuation of zero rating on export oriented industry by the economic managers, will throw Pakistani exporters totally out of the international competition.
Kashif Shabbir, President of Rawalpindi Chamber of Commerce and Industry said nowadays VAT is a world-wide system of taxation but Pakistan's economy is not documented and many sectors are not paying any sort of tax. He said if the government wants to improve its revenue collection in shape of taxation it should have to bring other sectors such as agriculture and property under tax net.
Kashif added that there are many farmers whose earnings are in millions but they are paying nothing to the government. He said if the FBR fails in expanding the tax net it will ultimately increase the prices of the daily use items. He urged the government to avoid introducing VAT if the FBR lacks determination. He said ironically, all the finance managers are working on implementation of the agenda of the IMF and have no vision of general public problems and hardships.
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