Broadening of tax base stressed

Revenue shortfalls across the world are expected due to the global financial crisis and with low productivity within the region resulting from massive exemptions, poor administration, low threshold, lack of transparency and enforcement, the government faces a massive challenge.
This was stated by Abdul Raheem Suriya, President, Institute of Chartered Accountants of Pakistan (ICAP) while delivering a keynote address in a pre-budget seminar, organised by the institute at local hotel on Thursday. He said the solution lies in broadening of tax base.
The service and agriculture sectors' contribution to the exchequer is extremely low in comparison with the contributions made by the manufacturing sector while their combined contribution to GDP is three times higher than the share of manufacturing sector, which forces the industrial sector to carry the burden of tax, he added.
"Another major reason for low tax collection is the system complexity and taxpayer's lack of faith in the present taxation system," he maintained. "Simplification of tax rules and procedures will not only provide relief to taxpayer, but will also lower the processing cost of compliance, he said, adding that it has been observed that compliance is generally high when tax rates are low. There is a dire need for achievement of high level of voluntary compliance through tax policy and administrative reforms like in other countries of the world."
He said Value Added Tax law has been designed with a view to documenting all economic activities including the service sector for increasing the tax base. Implementation of VAT demands major reforms in tax administration and proper integration of the Federal and provincial tax mechanism, he added.
Some significant suggestions related to this new law have also been included in this memorandum for immediate attention of the FBR, he pointed out. He expressed the hope that these proposals and recommendations have been prepared with a view to bring about tax reforms, including suggestions to simplify the law and remove ambiguities in tax regulations, broaden tax base and adopt effective measures against tax evasion.
The panel discussion was chaired by Asrar Raouf, member Direct Sales Tax Policy FBR and the panellists S M Shabbar Zaidi, FCA, Partner Tax Services, A F Ferguson & Co and Shaikh Saqib Masood, FCA, Partner, KPMG Taseer Hadi and Co, highlighted various key sectors and loopholes, which were neglected in the past. Haider Ali Patel, FCA Partner Tax, Ernst & Young Ford Rhodes Sidat Hyder delivered speech on direct taxes while Adnan Ahmed Mufti, FCA, Partner, KPMG Taseer Hadi & Co spoke on VAT and indirect taxes.