FPCCI Appreciates PM’s Directives for Paradigm Shift in Tax Structure

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ISLAMABAD, Mar 7 (APP): Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Nasser Hyatt Maggo on Sunday lauded Prime Minister Imran Khan’s directives to focus on reform in tax regime, simplification of tax laws, plugging existing loopholes, reduction in discretionary powers of tax collectors, and automation to bring transparency in tax system.

The FPCCI president, in a statement, said he had already invited attention of the prime minister through his letter in that regard. It was heartening that the prime minister was equally concerned with the tax reforms for accelerated growth, he added. Understanding of the prime minister in that regard, he added, showed his deep insight on the issues that were impeding economic growth with great attachment to the business community. Maggo said the PM had rightly taken up the issue of reforms in tax regime.

“The structure of taxation in our country is regressive, with indirect taxes accounting for major of total federal government tax collection. Tax collection is also disproportionate; industry being overburdened with tax payment of more than 60% against about 20% size in GDP.”

The present tax structure, he said, was complex because of overlapping jurisdictions with different laws and frequent policy changes through on almost daily basis by issuance of instructions, clarifications, changes in rules, CGOs, STGOs, ITGOs. The income tax, GST on goods, customs duties, and federal excises were collected by the FBR while GST on services was collected by provincial revenue aoards / authorities, which also fragmented Pakistan into five business market economies, he added.

“The withholding tax regime of over 65 in numbers is also problematic and businessmen have been made withholding agents to deposit the tax for FBR,” Maggo said.

The FPPCCI president said the tax returns should be simplified and easily understandable particularly for the SMEs (small medium enterprises) and make it a single page document.

“The present system requires almost all the tax returns filing persons to have further burden of associating the service charges of tax consultants and lawyers due to complicated tax operating system,” he noted.

The FPCCI chief said he had already written a letter to the PM for considering various suggestions on required tax reforms, including complex income taxation to change to flat rate taxation, taxation system to induce investments, multiple sales tax to change to single stage sales tax across the board with exemptions on food, live saving drugs, educational instruments. Further the low rate custom duties without additional custom duties, regulatory duties were answerable to impeding connived smuggling and mis-declaration, he added.

The appellate tax system, Maggo said, should be converted into independent tax judicial system in conformance with the requirement of constitution to increase the trust of businessmen in the taxation system. He said taxpayers bill of rights, protection of businessmen against retaliations by tax officials and accountability of tax officials should constitute fundamental to the requirements of tax reforms.

“The FPCCI has been demanding withdrawal of discretionary powers vested with the tax officials to avoid their misuse as presently FBR has become show-cause generating machinery for existing taxpayers, as are being informed to us at large.”

He stated to wipe-out corruption there was need to improve automation in tax system and develop local software and Apps with simplified system so that interaction of human resource should be reduced and strengthening of information technology system can combat issuance of connived bogus sales tax refunds which not only affect government revenue but also damage business community credibility and trust.

Maggo appreciated that a very good move had been done by present government by separating tax policy unit under the Ministry of Finance and not under revenucracy adjustment methods of FBR, which were only making tariff rate adjustments and making changes in statutes on compulsions due to observations of high courts and Supreme Court during budgetary exercises.

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