Persistent issue: Taxation remains a thorn in govt’s roadmap, says Bajwa

OICCI chief says strategy must include documentation of economy.

KARACHI: What would be categorised as the biggest economic achievement of this government so far?

You may mention the level of foreign exchange reserves or the declining inflation. But, for Overseas Investors Chamber of Commerce and Industry (OICCI) President Atif Bajwa, it is something else.

“Apart from the macroeconomic stability, the most important move of this government is that it has taken security issues head-on especially in North Waziristan and Karachi,” Bajwa told The Express Tribune in an interview. “Stability and security in Karachi will go a long way in boosting countrywide trade and investment.”

His answer sums up the deteriorating law-and-order situation that negatively affected the economic growth of Pakistan, especially in the last couple of years.

“We support the economic initiatives of the government but we also urge it to move fast and tackle structural issues in the interest of the country even if it has a negative political connotation,” said the OICCI official.

The body represents 195 multinationals operating in Pakistan. The companies based in 35 different countries and operate across 14 different sectors of trade and industry.

When asked whether he was satisfied with the pace of the government’s economic reforms, he said several initiatives have been taken including improvement in foreign exchange reserves, a relatively stable exchange rate and tight management of the fiscal situation that have stabilised the macroeconomic picture.

“I am of the considered opinion that the pace of reforms is considerably slower than the very high expectations of the business community when the current government took over in Mid-2013. This gap between expectation and reality is reflected in the fact that investors are still not coming forward with new projects.”

Pressing issue

Over the last few years, the most pressing issue for OICCI – one of the most influential chambers in the country – is taxation that is directly linked with the low tax-to-GDP ratio in Pakistan.

The current representatives of OICCI want to further address the issue.

“Instead of putting emphasis on the annual budget exercise, FBR should develop, share and approve a five-year tax and revenue enhancement strategy,” he said, adding that all future specific decisions should then emanate from this strategy.

That strategy must include the documentation of the economy to broaden the tax net, reducing corporate tax rate, and a complete ban on exemptions or amnesty schemes to any sector or group of people.

“The problem in Pakistan is that some sectors are heavily taxed while others are practically out of the tax net. This must end.”

The OICCI has been continuously showing concern on Pakistan’s declining ranking in the World Bank Ease of Doing Business.

“The government should address the concerns, due to which Pakistan’s ranking has gone down from 75 out of 189 countries in 2010 to 128, which is a big drop,” said Bajwa.

“One of the major reasons for this downward slump is taxation-related issues that significantly impact investment level in the country. The authorities have to show a high sense of urgency to make noticeable change in the governance and service level to stimulate rapid economic growth,” he added.

OCCI president was bullish about the continuous decline in inflation, saying that it is big positive as it puts a brake on the continuous increase in the cost of doing business in the country.

On lowering of the discount rate by 1.5% since November 2014,
he said, this has been very positive especially for the manufacturing sector.

“Some initiatives recently taken by the government in respect of energy and security may lead to an increase in private sector’s appetite for bank credit and revival of idle manufacturing capacity,” he added.

Published in The Express Tribune, March 24^th, 2015.

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