EDITORIAL: Tax reforms, rather the need for them, is (understandably) all the rage these days, considering the inability of FBR (Federal Board of Revenue) to raise revenue in light of the historic squeeze on reserves, which is why SECP’s (Securities and Exchange Commission of Pakistan’s) efforts to find novel solutions by involving the country’s top legal and corporate minds is appreciated; even though it should have come a long time ago.
And a number of interesting ideas did indeed come out at SECP’s symposium on Corporate Supervision and Regulatory Actions – Challenges and Reforms in Islamabad.
Delivering his keynote address on the second day, CJP (Chief Justice of Pakistan) Umar Ata Bandial hit the nail on the head by reminding everybody that the tax regime for businesses must be “reliable and consistent with a transparent regulatory framework for the protection of investors to provide a level playing field in Pakistan”.
Once again, like so many other smart ideas floated at the gathering, this realisation is not new; it’s just that no administration has ever taken the trouble of enacting reforms that would result in a fairer and wider tax net.
Of course the tax regime needs to be consistent, just like the CJP pointed out, because the last thing businesses and investors need is the uncertainty of successive administrations dismantling and toggling tax policies already in place.
Considering, especially, that skewed tax policies, mostly stemming from political considerations of pleasing allies and targeting opponents, have compromised the revenue collection machinery and practically brought the economy to its knees, the country’s very survival now mandates a thorough revision of all existing policies, identification of all sectors whose tax benefits have not been tapped properly, and a very strict implementation of a new regime spread equitably across all sectors.
And the CJP did not forget to mention that it must also be reliable. It cannot be stressed and repeated enough times that investors that commit serious money to businesses hate nothing more than uncertainty. And nothing frustrates them more than the prospect of one administration undoing all the work of the previous one; again for purely political considerations.
There is much talk about a so-called charter of economy among the country’s top political parties these days. No doubt such a step is necessary, considering the economic emergency that the country finds itself in, but even this initiative will not do the job unless all of them agree to implement corrective policies for the long-term.
It will do no good to businesses, the economy, or the people if their representatives just sign on the dotted line, agree to hammer out solutions, but then go right back to the old way of playing politics when in power. “We need to provide certainty, fair taxation, and transparent regulation for business growth,” the CJP rightly said, but this will not be possible unless the political elite first pulls its socks up.
He was also right that since the “court system is overworked”, regulators must help reduce their burden by “playing their due role in settling corporate disputes”. Businesses simply cannot thrive, or even survive, without an empowered, effective and transparent justice system.
This is where the country’s legal machinery simply fails them, because it’s much easier, feasible and also sensible to pack up and set up shop elsewhere than wait for years and decades for the honourable courts to settle their cases, even petty ones. That is why his backing for proposed amendments in the SECP Act for constituting corporate tribunals makes a lot of sense.
If the average Joe on the street can see it, then the country’s top stakeholders must also realise that its financial health and prospects are the worst they’ve ever been. And at the heart of the crisis is the paralysis in revenue collection.
Once again, thanks to SECP, the brightest and smartest people in the country are urging the politicians to finally make the correct tax decisions. If they still do not do it, they will not just be responsible for bringing the economy to its knees, but also for fighting for it when there was still a small glimmer of hope.
Copyright Business Recorder, 2023