ISLAMABAD: The government’s decision to increase sales tax rate from 17 to 18 per cent is a temporary measure, as Federal Board of Revenue (FBR) needs to document informal economy instead of heavy taxation on compliant taxpayers.
President Citizens Developers Association, Former President Islamabad Chamber of Commerce and Industry, Sardar Yasir Ilyas Khan, while talking to Business Recorder, said the government’s decision to increase GST is a temporary solution; hence, the undocumented economy of markets across Pakistan needs to be brought on board and added to the tax net so that the entire weight of the tax liability does not fall onto the shoulders of the average tax payer and businessmen across the country.
He said the tax-to-GDP ratio must increase over nine per cent in order for the country to be able to meet its expenditures.
Former president ICCI said that devaluation of the rupee has enhanced the debt burden for Pakistanis and collective liabilities have exceeded $100 billion. The business community has constantly been pushing all the governments that have come and gone to introduce structural reforms in order to control costs and unnecessary expenditures.
All state-owned enterprises should have been privatised long ago which are in loses with atrocious liabilities that would overburden any new buyer willing to acquire them. Despite global recessions and natural disasters over 170 countries world-wide are able to manage their affairs without the support of the IMF, then why cannot Pakistan?
He said Pakistan is a country which has the 5th largest reserve of minerals, 5th largest producer of mangos, top 10 in terms of rice and cotton production with an area of over 850,000 sq kilometres and a coastline with the finest beaches and the potential to develop the best waterfront properties.
These loans have become a greater burden for Pakistan’s current and future generations as opposed to being considered as a form of relief. Constant escalation in the tariffs, increase in GST, and additional taxes on real estate, retail, increased import duties and constantly rising food inflation are all factors which have turned the people of Pakistani into survivors and will force industries to relocate elsewhere.
Unofficially it has been estimated that inflation has reached over 50 per cent, this number is shocking when compared to the UK which is facing only 11 per cent inflation and Switzerland which has merely touched 3.3 per cent.
He said the increased cost of living and doing business in Pakistan has become the leading reason behind all the brain drain problems we are facing. Furthermore, Pakistan will continue to face a fiscal deficit year on year until FBR broadens the tax net. The tax system has already been declared as one of the most complex in the world which badly needs restructuring.
He said the FBR has been trying to scrutinize the real estate industry which drives nearly 60 allied industries and is already encumbered with taxes such as advance capital gains tax, stamp duty, advance income tax, tax on property retention, tax on deemed income, foreign assets, property tax, tax on rental income, etc.
The FBR needs to prevent any further rise of taxes on both large and small scale industries, as well as, all those sectors which are contributing to the economy, if the cost of doing business exceeds any further businesses will have no choice but to relocate to the Middle East or the West.
He said this primarily revolves around the high cost of lending, increased tariffs, fuel prices, labour cost, and high cost of raw materials due to increased duties, import taxes and ban on imports in general.
Copyright Business Recorder, 2023
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