LAHORE: Former Finance Minister Dr Hafiz A Pasha has expressed the hope that Pakistan might achieve 13 percent tax to GDP ratio in the next three years.
“Our economic team has to come with broader, most strategic and structural reforms, both in design and execution, in the administration of tax system,” he stressed.
He was addressing a pre-budget conference organised by Business Recorder in collaboration with Federation of Pakistan Chamber of Commerce & Industry (FPCCI) along with other associations at a local hotel on Sunday. Federal Finance Minister Muhammad Aurangzeb graced the occasion as chief guest, which was attended by a top businessmen of the country.
Uncertain budgetary outcome in 2023-24
Dr Pasha urged the Federal Finance Minister to strategise 3 percent increase in the tax to GDP ratio in the next three years by developing provincial tax system, which according to him should be the fundamental tax reform in the country. There is also a need to address the disproportionate share of indirect taxes.
There has been some improvement over the last two three years due to the development of direct income tax, which is relatively grown fast because of the levy of super taxes. Nevertheless, the incidence of taxes on the lower quintile of Pakistan’s population is about 12 percent of their income because of the heavy reliance on basic items of consumption for taxation.
On the other hand, the incidence on the top quintile is 9 percent. At present, he said, the provincial share in revenue generation is 8% and the federal government collects 92% of revenue. In India, on the other hand, the tax to GDP ratio has reached to 17% while the union government generates 11% and the states collect 6%.
He said the IMF tax proposals are extremely weak, not in structural nature and primarily represent a tinkering with small changes here and there and minor variations in tax rates. Our economic team has to come with broader and strategic tax reforms, he stressed.
Dr Pasha proposed a strong provincial tax system to increase revenue generation and compared the situation on ground with India where share of states in revenue generation is higher than Pakistan.
He also suggested reduce tax burden on the industry, which pays 68% of the total tax revenue. Burden on industry is more than overall burden on the national economy, he said.
Another renowned tax expert Dr Ikramul Haq said both the industry and businesses are over taxed. He further pointed out the tax department’s capacity to get tax on real income has been reduced. He proposed to abolish presumptive taxes. He said taxes only on real income in the present digitised world where inflows and outflows can easily be captured.
Leading industrialist Almas Haider, while speaking on the occasion, said Indian writer Shashi Tahoor has written books on how heavy taxation in India led to transferring of industry to England. He said heavy taxation on the industry was unbearable, as the entrepreneur is left with nothing to reinvest after paying 52% tax incidence on his company.
He proposed the federal government to encourage domestic investors to avail investment incentives like the foreign investors other Pakistan would be net importer of dollars after four years like it happened in the case of IPPs.
Woman entrepreneur Qurrat Ul Ain urged for improvement in women participation in business activities. She said there is a need of gender sensitive policies to let the women entrepreneurs grow in Pakistan.
Vice President FPCCI Saqib Fayyaz Maggoon urged all the business organisations to play their roles in tax generation and bringing retailers to the tax net. He proposed that consumers should be given incentive of 5 percent cash back in case he buys from a registered retailer. He also demanded removal of further tax for sale to the unregistered person. Ali Khizar, head of BR Research, moderated the panel discussion.
Copyright Business Recorder, 2024