Fed govt in talks with IMF to take line on issue of sales tax in compliance with constitution, hopes CM

KARACHI: Sindh Chief Minister Syed Murad Ali Shah has said that he believed as Pakistan moved forward in the talks with IMF, the line the federal government would take on the issue of sales tax would be in compliance with the constitutional position, ensuring respect for the provincial autonomy guaranteed in the constitution of Pakistan.

In a letter to Prime Minister’s Advisor for Finance & Economic Affairs Dr Hafeez Shaikh, the Sindh chief minister quoted a news report appeared in the national press which reads as “the government has conceded to the IMF that the present arrangement of four provincial and one federal authorities looking at goods and services tax has increased the cost of doing business in an exponential manner and large businesses have been complaining about the compliance cost”. In three years-time, we will move to a single tax collection agency with single return and single auditing authority to cut down on compliance costs,” the government has told the IMF.

Shah says the news reported does not correctly represent the purpose of the talks held, on the sales tax issue, during Pakistan’s last mission to the IMF earlier last month. “Nevertheless, if that is not the case, the arrangement under contemplation would be contrary to the express stipulation of constitution of Pakistan, which, against entry No.49 of its fourth schedule (federal Legislative List) provides, `tax on the sales and purchase of goods imported, exported, produced, manufactured or consumed except for sales tax on services,” Murad says.

Shah reminding Dr Hafeez Shaikh says “your good self, in your previous capacity as finance minister of Pakistan, have been a part of momentous changes that witnessed the transfer of collection of sales tax on services, initially, to Sindh in 2010, followed by other provinces.”

The chief minister further says that he trusts as Pakistan moves forward in the talks with IMF, the line Government of Pakistan will take on the issue of sales tax will be in compliance with the constitutional position, ensuring respect for the provincial autonomy guaranteed in the constitution of Pakistan.

The chief minister tells Dr Hafeez Shaikh that Sindh has come a long way since the time it had assumed the collection of sales tax on services. “We will be glad to see or be a part of any effort that leads to improvement in the overall tax collection system it the country, being an important stakeholder under the NFC scheme. He further adds “given its experience and success it has made in the levy and collection of sales tax on services in the last eight years, Sindh can offer meaningful input for performing the present tax structure within the domains prescribed in the constitution.