FPCCI demands reduced sales and corporate tax

Says finance ministry should cut sales tax by 7%

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to reduce the sales tax rate to single digit and cut corporate tax to make the upcoming budget business friendly.

Speaking at a meeting with trade associations on Friday, FPCCI Vice President Riaz Khattak said the finance ministry should reduce sales tax by 7% in the upcoming budget to increase government revenues.

He said around 3% of the population was paying sales tax and the revenue the government received was around Rs300 billion. However, if the sales tax rate was cut by 7%, it would earn more than Rs900 billion, he estimated.

“Our sales tax rates are comparatively higher than Afghanistan and India,” Khattak said. “The more the government facilitates in taxes the more revenue it can generate.”

He suggested that the government should also focus on direct taxes and introduce a flat rate of tax for as many sectors as possible to improve the relationship between taxpayers and tax collectors and enhance collections.

Pakistan had 1.6 million taxpayers in 2006, a number that has now dropped to around one million, indicating a lack of trust between the taxpayers and collectors, which can be restored with little effort, he said.

“Low tax collection has impaired the state’s ability to spend on the social sector and ensure equal distribution of wealth and it has become difficult for the government to raise revenues for its own expenditure,” said the FPCCI official.

Similarly, preference of indirect taxes over direct taxes has increased poverty and other social problems while it was helping the rich without any obligations, he added.

FPCCI Regional Standing Committee Chairman Ahmad Jawad stated that there were 58 kinds of withholding taxes imposed on masses with around 5,000 tariff lines.

“Industrialists have to tackle 55 different federal taxes and other provincial taxes, their compliance requires a lot of time which resultantly increases the cost of doing business,” he pointed out.

Out of the total collection, 75% of revenue was collected through indirect taxes, while 80% collection of direct taxes comes from WHT. Some big companies are silently shifting the burden of taxes on to masses which must be noticed, he said, adding flaws in the taxation system have resulted in poverty as 80 individuals around the world have more wealth than half of the world’s poor.

Jawad suggested to the government to introduce a simplified tax regime in the upcoming budget, which may help in the transformation of the economy.

Published in The Express Tribune, May 21^st, 2016.

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