Business (tax) friendly government?

The manifesto and claims of PMLN government revolve around promoting businesses in Pakistan; but Dar?s economic management is somehow making existing tax paying sectors unhappy. The taxation policies are skewed towards indirect taxation and within the purview of direct taxes, the inclination is on WHT and minimum taxes which are effectively indirect taxes. %D¯BR?s focus apparently seems to be meeting ambitious tax revenue targets and that money is then thrown in the pool which is at the behest of Ministry of Finance. And the usual practice is to minimize the fiscal deficit irrespective of the very purpose of any tax collection under a new head. On top of it, federal government keeps on encroaching provincial taxation domain as well. %D¯or example, in case of Gas Infrastructure development, the federal government has not only taxed a provincial subject, but the collected amount is not being used for its said purpose. In case of pipeline infrastructure expansion by SSGC and SNGPL, ECC despite Ogra?s the objection has ordered to collect Rs100 billion from consumers. The Rs150 billion collected so far under GIDC is probably used to finance government?s current expenditure. The poor costumer is paying double tax on infrastructure expansion, which to date exists only on papers. The Finance Minister also sways away from his commitments to businesses. For example, a super tax was imposed categorically for one year at 4 percent for banks and at 3 percent for corporate having income over Rs500 million. The collection target for FY16 was Rs22 billion. Dar is now believed to be thinking to extend super tax for another year, in the name of financing the armed forces for ongoing operation. Will it eventually go for Zarb-e-Azb or be just used to plug the deficit will never be known.What is the purpose of reducing the corporate tax rates in a staged manner when super tax is becoming a recurring feature? The taxation policy should be based on economic expansion and job creation; but the skewed focus on extracting more and more taxes from existing taxpayers is simply forcing businesses to shelve expansion plans and take money out of the country or park in real estate. One of the most favourite taxation policies is the minimum tax on income, which is collected on revenues and is non-adjustable irrespective of the income of companies within those sectors. In many cases, the actual liability becomes much higher than corporate tax rate. In FY16, a minimum tax of 8 percent was imposed on service providing companies, while the margin in most cases is much lower to justify such a high tax. Similar is the case of oil marketing companies, those in edible oil business and the list goes on. The leaning on presumptive tax regime, be it in the form of minimum non adjustable taxes or adjustable withholding taxes, simply shows the inability of FBR to collect taxes in direct form. What is the point of having thousands of officials at FBR when the collection is mostly on revenues and regressive in nature? Isn?t it hampering the confidence of businesses and enhancing the cost of doing business? The cost of filing taxes is too high for small and medium businesses as they have to deal with number of tax authorities, both in federal and provincial domains with no mechanism to consolidate all of these entities. The fear of filing it in a correct way either hinders many to enter into new ventures or they opt to under pay the taxes. %Dª similar case is for stock brokers who used to pay FED but after provinces starting collecting GST on services, the practice of collecting FED from costumers discontinued. Now the FBR is asking not only to start collecting FED again while GST by provinces is there; but to submit retrospectively for past 3 years or so. How can a competitive industry submit indirect tax which was never collected from costumers? Is it fair to term such practices as ?harassment?? There are numerous other issues by various business communities on the duplication of taxation, on the turf tussle between two provinces on the issue of origination and termination amongst provinces and federal bodies. The losers are none other than businesses if they can?t pass on the liability. In other cases, it is the end consumers who end up paying higher prices of goods and services. Some taxes are adjustable in final returns but the refunds take ages and cause serious cash flow problems. Who would like to operate in a transparent way in such a complex and unjust environment? Sectors exempted from paying taxes keep on seeking rent at the cost of tax payers. Tax base remains low with a handful of resources including imports, oil & gas, banking and a few manufacturing sectors contributing bulk of taxes. On the flip, agriculture, textile, power, wholesale and retail trade, and real estate contribute little taxes, despite large GDP shares. None of the power generation companies are paying income tax irrespective of abnormally high profits by a few, discos keeps on making high losses but there is no progress on privatization front. The new power plants are coming online in a couple of years, while the industry is moving towards their own power generation. Only 200 mmcfd of RLNG was enough for textile players to produce their own power. Many other would follow after the RLNG supply is doubled. The discos are providing more and more power to consumers and many of them don?t pay bills. The losses of discos are bound to increase and the circular debt may pile. That probably will be collected from honest taxpayers? bills. The other problem of upcoming power projects would be that there would not be enough demand and government would keep on paying capacity charges, irrespective of their generation. Who will pay it? Yes, the already taxed sectors and individuals. Now under the circumstances, what is the resolve for rational businessmen? Perhaps open an offshore account in any of the islands.