Budget FY24: FPCCI underscores need for introducing taxation reforms

KARACHI: Irfan Iqbal Sheikh, President FPCCI, has said that the much needed taxation reforms must be introduced in the federal budget 2023–24 based on international best-practices; principles of simplification of the taxation system and broadening of the tax-base.

We need a business-friendly and pro-growth budget to play the catalytic role in putting the economy on the right track, he added. He emphasized that taxation system in Pakistan contributes to the national exchequer less than 10 percent of the GDP; indicating that it is not balanced, broad-based and simplified.

The taxation system’s heavy reliance on indirect taxation and surcharges is damaging the economy; and, taxes are insufficient for debt servicing, defence, social welfare and public-sector development programs, he added.

FPCCI Chief added that, contrariwise, taxpayers lack knowledge of their obligations; and major taxation policy changes are not supported by the required changes in the administrative framework.

FBR lacks adequate organizational structure; business processes; business-friendly facilities; institutional budget and sufficient pool of human resources. In addition to that, FBR and its staff are not equipped with the current technological developments and the resultant digitalization.

Irfan Iqbal Sheikh enlisted basic principles to provide foundation to the government for its taxation policies: (i) taxation policies should support businesses to diversify into untapped international markets through creating enabling environment for export-oriented businesses; be competitive in regional, sub-regional and international markets; (ii) taxation system should be facilitative enough to attract Foreign Direct Investment (FDI) for sustained economic and business growth; (ii) maintaining macroeconomic stability is a prerequisite for inclusive and sustained development; and, taxation system should add ease in economic activities; rather than operating as a notice-manufacturing factory; (iii) generating desired revenues from the existing taxation system requires the government to review obsolete laws, regulations and taxation rates; and, develop an efficient tax administration with well-trained; well-equipped; professional and motivated human resources; (iv) there should be harmony and convergence in the objectives of taxation, industrial, exports and fiscal objectives – otherwise, none of these policies will work.

Zakaria Usman, Convener of FPCCI’s Budget Advisory Council, apprised that although volume of revenue collection has increased from Rs3112 billion in FY16 to Rs6148 billion in FY21, which shows nearly two fold growth of the revenue collection during six years, however, during the same period, tax-to-GDP ratio continued to remain stagnant in the vicinity of 10 percent of GDP. No country can post a substantive economic growth at this kind of abysmally low tax-to-GDP ratio, he added.

Copyright Business Recorder, 2023