Asrar Rauf, FBR Member, Direct Taxes, has said that broadening of the tax base "is the only key" to attain sustainable growth in tax-to-GDP ratio. This he stated at a seminar on 'Value-Added Tax' (VAT), organised by the Institute of Cost and Management Accountants of Pakistan (ICMAP) at ICMAP head office here on Friday evening.
He said that implementation of VAT aimed at enhancing the tax base, which would definitely create a positive impact on the tax-to-GDP ratio. He regretted that tax compliance in Pakistan is very poor in shape as out of 163000 taxpayers registered in sales tax department across the country, nearly 55000 taxpayers file their returns.
He said the Standing Committee of Senate on Finance has recommended imposing VAT at the rate of 12.5 percent, uniformly. "The proposal of the Senate committee is under consideration but VAT would initially be enforced at the rate of 15 percent across the board," he added. "The board has already reduced the rate of upcoming indirect tax to 15 percent as the general sales tax (GST) is being collected at 16 percent with 1 percent Special Excise Duty (SED)," he argued.
Earlier, Hammad Raza Zaidi, chairman of Karachi Branch Council (KBC) of ICMAP, said that the law manifests a collective, consciousness of the society to delimit liberties and to prescribe broader checks so as to strike a balance between individual freedom and collective responsibility. In other words, restraints imposed by law are for the greater collective good of the society. But they put burden on the people and enable the state to generate revenues to meet expenses. In reality, they provide means of contributing to the state in monetary terms to enable the latter to run smoothly, he added.
Later, in the question answer session, Khawja Tanveer, Commissioner, Regional Tax Office (RTO) answered several questions raised by participants.
He said the VAT would attract investment, capital formation and consequent economic growth. He said this levy would also lead to documentation of economy and a shift from import duties to domestic taxes, and termed it as a big challenge, at least in the developing countries. A large number of participants including professionals and students attended the seminar.