Tax on services: Bengali resents renouncement of provinces' authority of collection

Dr Kaiser Bengali, advisor to Sindh Chief Minister on Planning and Development on Saturday expressed resentment over renouncement of the authority of collecting tax on services by provinces, saying that the provincial government has no faith in Islamabad's pledges. He was speaking at a pre-budget discussion 'Supporting Fair Taxation,' organised by ACCA Pakistan held at local hotel here.
He said the authority of collecting tax on services had earlier been transferred to the federal government for two years in 50s. But ever-since the provinces are deprived of their constitutional right. On one hand, the federal government has developed consensus on the NFC amongst the provinces. At the same time, it has asked the provinces to withdraw from their constitutional right of collecting tax on services, he said.
Despite generating over 70 percent of total revenue, Sindh gets only 23 percent from the divisible pool, he said and added that if the federal government wanted to collect tax on services, the revenue would be distributed on merit. He dispelled the impression that the Sindh government is not capable of collecting tax on services, saying the Sindh Revenue Board (SRB) is about to be established in line with the federal tax collecting authority.
Kaiser said the Value Added Tax (VAT) could not be implemented successfully as the FBR has so far not drafted any comprehensive strategy in this regard. He opined that the VAT, which is going to be fully enforced in next fiscal year, would soon be reverted to General Sales Tax (GST) mode. Mrs Yasmeen Saud, chief commissioner, Large Taxpayers Unit (LTU) said VAT is a modified form of GST and added that the board is taking several measures to enhance the tax-to-GDP ratio and broaden the tax base.
She said the food items and medicines would be tax-exempted in VAT regime and added that several proposals are under consideration for its successful implementation. Abdul Majid Haji Muhammad, president, Karachi Chamber of Commerce and Industry (KCCI) said the board should address several problems before VAT implementation and the chambers would facilitate the board to broaden tax base. Arif Masud Mirza, head of ACCA Pakistan said that there is need for setting up a fair taxation system and culture of voluntary tax payment to encourage industrial growth.