Simplified taxation, accelerated economic growth: FPCCI waiting for implementation of PM’s instructions

ISLAMABAD: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) is waiting for implementation of instructions issued by the Prime Minister on March 3, 2021 to all the concerned Ministers.

On February 13, 2021, FPCCI wrote a letter to the Prime Minister for simplified taxation and accelerated economic growth, in which the President FPCCI suggested a simple, fair, and predictable tax system: 10% income tax 20% income tax for companies, 5% sales tax (for exporters 0% tax (one chapter, one rate, 5%) on all items and federal excise duty health-hazard products like cigarettes, beverages etc.

After receiving the letter, Secretary to Prime Minister, Azam Khan sent a directive of the Prime Minister to Minister for Finance, Minister for Industries and Production, Advisor to Prime Minister on Commerce and Investment, Special Assistant to the Prime Minister on Revenue, Chairman FBR, and Shaukat Tareen, to hold meeting with FPCCI and finalize taxation reforms/ changes in the light of Association's letter.

Chairman FBR was directed to make a presentation whereas Secretary Finance was asked to coordinate the meetings. The final decision/ options in this regard were to be presented to the Prime Minister within ten days.

The sources said, none of the Ministers, Advisor or Special Assistant contacted FPCCI on the instructions issued almost one month ago.

"We think, the concerned Ministries have thrown instructions of Prime Minister in the dustbin, which is very unfortunate. It appears that business community's proposals are not being considered worthy," said one of the representatives of FPCCI.

"We believe that entities paying sales tax can be easily doubled from 41,000 to 80,000 once a single stage tax is introduced," said President FPCCI Mian Nasser Hyatt Maggo.

FPCCI maintains that a cascading tariff structure since decades needs to be reviewed and efforts for industrial sector promotion by rationalizing the customs duties must be supported. The rationalization of customs revenue is not possible through narrow base (10 items contribute more than 80% receipts). A single rate of 5 per cent for all items will eliminate the menace of smuggling, arbitrary and/or favourable valuation, complicated registration processes as well as the SRO-ridden system. This will bring the customs revenue down from Rs. 626 billion to Rs. 346 billion. "We believe that this reduction is necessary as over-reliance on import stage taxation has proven harmful for industrial development and has fuelled inflation."

FPCCI also argues that by levying FED on cigarettes, carbonated drinks and luxury items and through better enforcement, the collection can go up from Rs. 250 billion current to Rs 333 billion. FED on all other items should be removed.

"Total taxes collected under the new system can go from Rs 3.9 trillion (which includes refunds) to Rs. 5.6 trillion (without any refunds) in 2021-22, of which direct taxes will be 54%, up from 38% currently, thus realizing a critical manifesto promise of government to move towards progressive taxes, a goal which the present system has failed to achieve," he continued.

A substantial addition in the income tax can be effected through levying 10 per cent income tax on large land holders for which provincial governments should be taken on board.

Copyright Business Recorder, 2021