The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Friday urged the government to reduce sales tax to single digits and cut corporate tax to make the upcoming budget business-friendly.
In a meeting with trade associations, FPCCI Vice President Riaz Khattak said that the federal finance ministry should reduce the percentage of sales tax by seven per cent in the coming budget in order to increase the government revenues, as around three per cent population was giving GST and the revenue they received was around Rs 300 billion. If the government decreased the ratio of sale tax on seven per cent, the government would earn more than 900 billion rupees, he estimated.
“If we compare make a comparison with our neighbouring countries, our sales tax rates were comparatively higher even more than Afghanistan and India.” He said the more the government facilitated in taxes the more revenue would be generated. I don’t know why the ministry failed to understand this simple theory, he added.
Riaz Khattak suggested that the government should also focus on direct taxation and introduce flat rate of tax for as many sectors as to improve relationships between taxpayers and tax collectors and enhance collections.
Pakistan had 1.6 million taxpayers in 2006, which now reduced to around one million that indicated lack of trust between taxpayers and collectors which could be restored with little efforts, he said. He also told that low tax collection had impaired the state’s ability to spend on social sector and equal distribution of wealth and it had become difficult for the government to raise revenue for its own expenditures. Similarly, preference of indirect taxation over direct taxation had increased poverty and other social problems while it was helping the rich to enjoy without any obligations, he added.
However, Chairman of FPCCI Regional Standing Committee Ahmad Jawad further stated that there were 58 kinds of withholding taxes of different natures imposed on masses with around 5,000 tariff lines. “Industrialists have to tackle 55 different federal taxes and other provincial taxes. Their compliance requires a lot of time which resultantly increases cost of doing business,” he pointed out.
Out of total collections, 75 per cent of revenue was collected through indirect taxes, while 80 per cent revenue collections of direct taxes came from WHT, he told. “Some big companies are silently shifting burden of taxes on masses which must be noticed,” he said, adding that flaws in the taxation system had resulted in poverty as 80 individuals around the world had more wealth than half of the world’s poor, he added. “Jawad proposed the government to introduce simplified tax regime in the upcoming budget which may help for the transformation of the economy,” he said.
