Federation of Pakistan Chambers of Commerce and Industry's (FPCCI) senior vice president Abdul Rahim Janoo said here on Thursday that domestic economy was under extreme pressure in the wake of severe energy crisis and it has damaged the industrial activities in the country. Besides, growing poverty, outflow of investment, lower capacity to generate public revenue, high indebtedness and social unrest were the common phenomena, he added.
He was speaking at a pre-budget seminar organized jointly by Karachi branch of ICMAP's council and the FPCCI. He urged the Finance Ministry to set up a permanent review committee for expeditious refund of exporters' stuck up money and the proposed committee should comprise representatives from FPCCI, Federal Board of Revenue (FBR) and the Institute of Cost and Management Accountants of Pakistan (ICMAP).
Pointing out that the country's tax system emphasised more on indirect taxation and surcharges, he said: "Traditional approaches for financing the deficit and mobilisation of resources through heavy indirect taxes have been damaging the country's economy." Referring to the FPCCI's budget proposals for the year 2015-16, he said that emphasis should be given for increasing growth of gross domestic product (GDP), enhancing revenue and creating jobs through industrialisation, broadening of tax base and documentation of economy.
He also underscored the need for framing a business and industry-friendly tax policy, besides refunding sales tax. Claiming that corporate tax rate in Pakistan was comparatively higher in the region, he suggested that it be brought down and a uniform tax rate be introduced for all businesses, irrespective of their legal status, as such a move will promote industrialization.
Referring to sales tax rate in Pakistan, he said they are quite higher as compared to the region and suggested that it should be reduced to single digit, making it non-adjustable and non-refundable for improving tax collection. Pointing out that although the agricultural sector contributed around 24 per cent share in the country's overall GDP, its share in total tax collection stood at 1pc only. He suggested that the agricultural sector should be brought under the tax net and its rate of income tax should be increased.
He also proposed that government should seek help of management accountants for improving financial and monetary efficiency as well as in rationalising tariff and tax structure regime. Janoo said that the ICMAP could play a very important role by indicating grey areas of the economy and through its suggestions whereby cost and expenditures at government and private sector levels could be curtailed drastically.
He was of the view that marginal ups and downs in economic indicators did not provide a sustainable solution, besides they cannot change our global placing in economic ranking. FPCCI's former vice president Zubair Tufail said that although general tax level did influence domestic investment decision and inward flow of Foreign Direct Investment (FDI), the tax policy of the country was such that a large segment of highly placed people were out of tax net.
He said that although revenue collection had considerably increased from Rs 347 billion in 1999 to Rs 2,475 billion in 2013-2014, many reform initiatives and the ratio of direct taxes to GDP in Pakistan have remained stagnant ie in the vicinity of around 9pc and 3pc, respectively, over the last many years which, he added, was the lowest ratio among the countries of this region.
"This is high time that we must bring the `untouchable' agriculture and agro-sector and other sectors into the tax net," he said, adding that major causes of low tax-to-GDP ratio in Pakistan include a narrow tax base, poor compliance by tax-payers, too many exemptions (the most notable being agriculture), the presence of a huge parallel economy and a serious mismatch between sector-wise contributions in the tax-to-GDP ratio.
Moreover, the tax rates have been pitched at high levels, thereby creating a vicious circle of widespread tax evasion, he opined. He urged the FBR to further broaden the tax base by effectively plugging all loopholes in the tax collection system. Tufail said that the fiscal policy should not only be aimed at collecting taxes for meeting government expenditures, but it should also be considered as a means to achieve socio-economic development, self reliance, equitable distribution of wealth and a vehicle for providing momentum to private sector for its development.
He said that a tax-payer friendly taxation environment was a pre-requisite to create liberal tax culture and broaden the tax base by way of voluntary compliance and without any fear. Earlier, ICMAP's Karachi chapter's chairman Khalid Mehmood presented welcomed address while FPCCI's vice president Shahnawaz Ishtiaq gave vote of thanks.
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