MQM opposes imposition of VAT

-Muttahida Qaumi Movement (MQM) has strongly opposed the imposition of the value-added tax (AVT) and asked the government to generate additional revenue by imposing agricultural income tax on feudalists and landlords. Dr Abdul Kadir Khanzada said while talking to Business Recorder that his party is not in favour of imposing VAT in the country.
He said that the poor are already living in miserable conditions due to inflationary pressures and the imposition of VAT would further increase food prices as well as of other commodities. The imposition of VAT at a uniform rate of 15 percent across the board would raise prices of consumer items and essential commodities.
The basic problem of VAT is its inflationary impact on small consumers. It would be unfortunate to impose VAT on basic items like bread, poultry and many other consumer items. The government should focus on potential areas to increase direct tax collection, whereas VAT would only hurt the poor people, as it is basically a "consumption tax".
The collection of VAT on services is the right of the provinces under the Constitution, but the FBR should improve direct tax collection, which can be done by taxing potential non tax sectors, ie agriculture, real estate and stock exchanges. Instead of introducing a new tax, it is necessary to minimise the inflationary impact of VAT for which the existing arrangement of Sales Tax Act, 1990 should continue in the next fiscal year. The FBR has the option to withdrawn exemptions under the present Sales Tax Act for which enforcement of VAT is not necessary, he added.
"The government should tighten its belt and impose direct tax on big landlords. The government should also take enforcement and administrative measures to check revenue leakage to the tune of Rs 500 billion in the Federal Board of Revenue (FBR)," Khanzada said.
In response to a question, he said that the MQM supports the stance of the Sindh government on VAT. He said that according to constitution, it is the right of provinces to collect tax on services. He added that in the legislation of 18th Amendment, the collection of tax on services has been given to the provinces. "We are not in favour of new mechanism of imposing tax in the form of VAT," he said.