Budget 2016-17: ABC says budget lacks initiatives

Few attempts made to expand tax net, simplify tax administration

KARACHI: The American Business Council of Pakistan (ABC) has said that the federal budget for 2016-17 lacks initiatives to broaden the tax net and simplify tax administration for existing taxpayers.

The budget was seen as a continuation of the status quo with respect to overall policy reform. However, ABC members welcomed the government’s decision to extend tax incentives, under Section 65d, to new plants till June 2019 and the continued reduction in corporate tax rate by 1%, in line with plans to bring the tax down to 30% by fiscal year 2018.

These moves will help promote foreign direct investment. “Our member companies will factor in these tax incentives when making critical investment decisions. With corporate tax currently at 31%, it remains high when compared to the rest of the world,” a press release quoted ABC President Nadeem Elahi as saying.

However, bold reforms were required to widen the tax base and simplify the taxation structure, he added.

The investor group was of the view that while certain aspects of the budget could be considered investor friendly, other measures would have a negative impact on the overall business environment by increasing the cost of doing business and burdening the existing taxpayers with indirect taxes. “The extension of super tax has negated the positive impact of reducing the corporate tax rate,” said Elahi.

Furthermore, the proposal to exclude sales tax paid under provincial laws from the definition of input tax is a fundamental departure from the value added tax (VAT) principles and will have an inflationary impact.

Published in The Express Tribune, June 10^th, 2016.

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