ISLAMABAD: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has submitted proposals to the Prime Minister for simplified taxation and accelerated economic growth.
"We need a simple, fair, and predictable tax system: 10% income tax 20% income tax for companies, 5% sales tax (for exporters 0% tax (one chapter, one rate, 5%) on all items and federal excise duty health-hazard products like cigarettes, beverages etc," said, Mian Nasser Hyatt Maggo, President FPCCI in a letter to the Prime Minister, Imran Khan.
According to the research done by the country's leading tax expert Huzaima Bukhari, the number of income tax returns with tax paid 4 million in 2021-22, from 2.19 million currently out of which almost 1 million paid no tax. This includes businesses, non-salaried individuals, and professionals, many of them are currently not filing income tax returns for various reasons. This will double the income tax collected from Rs. 1.5 trillion to Rs. 3.0 trillion in 2021-22 without reliance on withholding taxes, advance tax, or minimum tax.
Presently, collection of sales tax is related to a few commodities. This is confirmed by the fact that petroleum products alone contribute around 44 percent of the total domestic sales tax collection. Against the prescribed rate of 17%, if Pakistan introduces simplified and single stage sales tax at the rate of 5%, based on the size of retail market of Rs.22.8 trillion, import of 6.6 trillion and manufacturing of Rs. 8.58 trillion, this can yield Rs 1.915 trillion, up from Rs 1.596 trillion currently.
"We believe that entities paying sales tax can be easily doubled from 41,000 to 80,000 once a single stage tax is introduced," he added.
FPCCI is of the opinion that that a cascading tariff structure since decades as has been discussed needs to be reviewed while supporting the efforts for industrial sector promotion by rationalizing the customs duties. The rationalization of customs revenue is not possible through narrow bases (10 items contribute more than 80% receipts). A single rate of 5 per cent for all items will eliminate the menace of smuggling, arbitrary and/or favourable valuation, complicated registration processes as well as the SRO-ridden system. This will bring the customs revenue down from Rs. 626 billion to Rs. 346 billion. “We believe that this reduction is necessary as over-reliance on import stage taxation has proven harmful for industrial development and has fuelled inflation.
PFCCI is of the view that by levying FED on cigarettes, carbonated drinks and luxury alone and through better enforcement, the collection can go up from Rs. 250 billion current to Rs 333 billion. FED on all other items should be removed.
"Total taxes collected under the new system can go from Rs 3.9 trillion (which includes refunds) to Rs. 5.6 trillion (without any refunds) n 2021-22, of which direct taxes will be 54%, up from 38% currently, thus realizing a critical manifesto promise of government to move towards progressive taxes, a goal which the present system has failed to achieve," he continued.
A substantial addition in the income tax can be by levying 10 per cent income tax on large land holders for which provincial governments should be taken on board. FPCCI's proposal for simplification of tax system to ensure payment of tax by all through our representative efforts as apex body representing all the CCIs and Association of Trade and Industry with overseas bilateral councils and counterpart Federal of Chambers in respective countries.
Copyright Business Recorder, 2021