LAHORE: Tax experts have urged the government to strike a balance between the need to update tax laws and the need to provide stability and predictability to taxpayers as repeated changes in tax laws lead to uncertainty, compliance costs, inefficiencies, disincentives, and revenue losses.
It may be noted that the finance ministry introduces changes in tax laws on yearly basis, and at times more than once in a year, which leads to wrong application of the relevant provisions by the tax authorities, followed by wrong assessment of tax liabilities of taxpayers.
Renowned tax practitioner Dr Ikram ul Haq said excessive changes in tax laws can have a range of effects on the economy, businesses, and individuals. Frequent changes in tax laws are creating uncertainty for businesses and individuals, making it difficult for them to plan their finances and investments. This uncertainty can lead to a slowdown in economic activity, he added.
Hussain Sherazi, another tax consultant, said every time tax laws change, businesses and individuals must spend time and money to understand and comply with the new rules. This can be a significant burden, especially for small businesses and low-income individuals.
Muhammad Shahid Baig, another leading tax practitioner, said when tax laws change frequently, it can lead to inefficiencies in the tax system. Taxpayers may spend more time and money trying to optimize their tax liabilities, rather than focusing on productive activities. In addition, he said, frequent changes can make it harder for tax authorities to enforce the tax code effectively.
Another tax practitioner said changes in tax laws can create disincentives for individuals and businesses to invest and innovate. For example, he said, if tax laws change frequently, businesses may be less likely to invest in new technologies or products, as they may not know whether the tax incentives for these investments will remain in place.
Finally, said another tax practitioner, frequent changes in tax laws can lead to revenue losses for governments. When tax laws change too often, taxpayers may become less willing to comply with the tax code, leading to lower tax revenues.
Copyright Business Recorder, 2023
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