Daily Times

Pakistan’s tax assessment system needs essential changes to prompt development of the national economy. Fiscal policy and tax administration are crucial for businesses in the formal sector to compete on an equal footing with those in the informal sector.

These views were expressed by Pakistan Business Forum (PBF) Additional Secretary General Dr Urwa Elahi while talking to APP here on Saturday. She said that the capability and capacity of the Federal Board of Revenue (FBR) to implement policies and the political will to pursue those outside the tax net were required for these reforms.

She said any action taken in a hurry for instant tax revenue would affect the profitability of formal sector businesses as well as the tax collection system. “Taxes ought to be straightforward, foreseeable, and in favour of business expansion and the formalisation of economy. It should be the goal to increase tax revenues by expanding the tax base and improving the profitability of current taxpayers. Currently, the sector that accounts for 20 per cent of GDP contributes a disproportionate 56 per cent of taxes. More jobs should be created, value-added exports should rise, and sensible import substitution should be encouraged. Taxes should be looked at in relation to manufacturing and commercial importers, as well as corporates and other types of business structures like Association of Persons,” she elaborated.

Dr Urwa asserted that corporations, particularly those which were listed and adhered to a higher standard of governance and accountability, their owners and shareholders should not be penalised. According to the PBF office-bearer, the wholesale, retail, and real estate sectors had the potential to bring in Rs747 billion in tax revenue.

She explained that by raising the initial investment required to cover the tax that must be paid in early loss years, minimum tax based on turnover acts as a barrier to new players’ entry. Because this is a simpler option than assessing taxable profits, FBR’s reliance on minimum, advance, and withholding taxes has increased significantly. It is necessary to gradually phase out this reliance. Imposing a base turnover charge on SEZ (Special Economic Zone) undertakings and others in their expense occasion periods nullifies the point of the duty occasion.

To check for imports which were under-invoiced, electronic data exchange should be implemented with key trading partners. Pakistan’s under-invoicing of imports from China, Singapore, the United Kingdom, and Germany, according to the Pakistan Business Council, results in annual losses of up to Rs 500 billion. The regions have minimal motivation to check pirating as customs obligation and GST avoided were government burdens and didn’t hurt their incomes straightforwardly. It’s possible that provinces will be rewarded for facilitating raids at shops that deal in illegal goods. The success of cell-phone registration with the PTA and the Urdu language labeling requirements for imported food could be applied to other goods that were susceptible to smuggling, she suggested.

Dr Urwa Elahi said that provinces had the potential to generate Rs 372 billion in untapped tax revenue from agriculture taxes and Rs 380 billion from property taxes. Presently, all territories were assembled to raise just Rs 3 billion from agribusiness charge and Rs 20 billion from local business charge. The case for renegotiating the National Finance Commission Award, which is unsustainable for the federal government in its current form, should be strengthened by higher provincial tax revenues, she concluded.