ICCI pleads case for single digit sales tax in upcoming budget

The businessmen in a meeting at the Islamabad Chamber of Commerce and Industry have called upon the government to introduce single digit sales tax rate in the federal budget 2016-17 as the prevailing sales tax in Pakistan is one of the highest having an overall unhealthy impact on the business and economic activities. They said the sales tax rate was 2-5 per cent in Afghanistan, 2-4 per cent in North Korea, 5 per cent in Taiwan and Nigeria, 7 per cent in Singapore and Thailand and 8 per cent in Japan, but 17 per cent GST in Pakistan is a cause of concern for business community and the general public.

Addressing the meeting, ICCI President Atif Ikram, Senior Vice President Sheikh Pervez Ahmed and Sheikh Vice President Abdul Waheed said that high sales tax in Pakistan was enhancing cost of doing business, giving rise to inflation, squeezing the purchasing power of consumers and discouraging the growth of business activities. They stressed that the government should bring it down to single digit level in the upcoming budget which would have healthy impact on business and economy.

They said the government had imposed a fixed sales tax per litre on all petroleum products effective from February 1, 2016, and this decision has deprived the citizens of the full benefit of big reduction in international oil prices. They said instead of increasing prices of petrol and diesel for the month of April 2016, the government should have rationalised GST on POL products as it was collecting about Rs 25 per litre on petrol in a fixed sales tax of Rs 14.58 and Rs 10 as petroleum development levy in addition to about Rs 38 per litre on high speed diesel which included Rs 29.57 as sales tax.

They said the corporate income tax in Pakistan was also third highest in the world as confirmed by the World Bank report 2015 titled “toward a more business friendly tax regime: key challenges in South Asia”. They said the global average corporate income tax rate was 24 per cent, but in Pakistan it was 34 per cent which needed to be revised downward to facilitate the growth of corporate entities in the country.

The businessmen were of the view that reducing high tax rates and cutting down number of taxes would entail beneficial outcomes for the economy as it would promote healthy tax culture, encourage people towards tax compliance, expand tax base, improve overall tax revenue and enable the country to get rid of more foreign borrowings.