Rs 275 billion annual tax evasion by 11 sectors

A parliamentary panel was informed by chartered accountants led Tax Reforms Committee (TRC) on Thursday that the tax theft by 11 sectors alone is causing a revenue loss of $2.6 billion or Rs 275 billion per annum to the national exchequer and urgent steps are required to curb the menace of under invoicing and misdeclaration.

TRC Head Masood Naqvi along with members Asfaq Tola and Abid Shaban briefed the Senate Standing Committee on Finance chaired by Saleem Mandviwala. Naqvi said the TRC worked for a year and half to compile its report and now the government has set an implementation committee under Haroon Akhtar Khan.

The committee was informed that a loss of Rs 275 billion alone was caused every year duty to evasion of customs duty and excise and sales tax by importers of tyres, tea, televisions, cigarettess, plastic granules, high speed diesel, mobile phones, steel sheets, vehicles, auto parts and fabrics.

He said that the single digit and single stage GST proposal was not accepted by the IMF, even though TRC spent five days explaining the issue to the IMF team. He said that the GST was charged at 17 per cent but effective rate was less than 6 per cent and they proposed lowering it down to six per cent. He said the recommendations will be implemented in phases as some could be implemented immediately next fiscal year while some may require more than two years.

He said that TRC had prepared legislation on Benami accounts, declaration of foreign assets and accounts last year but the government did not introduce it with the finance bill last year. He said Benami accounts legislation has been introduced but the others still awaited. He said if these were introduced then matters related to Panama Leaks could be investigated.

Kamil Agha said that the TRC’s work was enormous and they should share it with the committee. However, Naqvi said it could be done only by Finance Minister Ishaq Dar on whose directives the committee was formed and who was custodian of the report. However, he said one copy on the report was with the chairman of the committee. The members decided to look into the report before receiving a briefing from the TRC. It was decided that the TRC would brief committee on June 1.

Earlier, while briefing the committee, economist Qaiser Bengali said that due to the successive governments’ policies, agriculture and manufacturing sectors were losing steam in the country. He said that both sectors are growing at less than the population growth rate and in future Pakistan may have to face food shortages.

He revealed that 85 per cent of the taxes were being generated through regressive indirect taxation through withholding taxes. He stressed that the government should provide incentives to the agriculture and manufacturing sectors to curb rising unemployment in the country. He proposed that the government should provide 70 to 80 million small plots of 80 to 120 square yards in 70 cities of the country to kick start construction activities.