Shortfall: Absence of political will behind low tax revenue

PIAF chief says low collection has affected development strategies

LAHORE: Pakistan Industrial and Traders Association Front Chairman Irfan Iqbal Sheikh has expressed his reservations about the revenue shortfall the country faces that has impacted development strategies of successive governments.

Sharing his concern, Sheikh said conditions were continuously worsening as no government had tried to address the issue and worked on an ad hoc basis. “Changes can only come about with the political will,” he said while talking to members of the Lahore Economic Reporters Association.

Sheikh said tax collection was low because instead of expanding the tax base, the tax rate was enhanced or indirect taxes were imposed with impunity. “The tax collecting mechanism is often busy finding out ways to enrich its purses through draconian laws.”

Elaborating his point, he said 85% of income tax was collected through businessmen, who acted as withholding agents. Similarly, most of the sales tax of the entire value chain is deposited by businessmen in the national exchequer without any efforts by the tax collectors.

He said customs was the only avenue where duties were assessed and collected by the FBR officials. However, he added, under-invoicing was so widespread that it ate up around Rs500 billion in revenues every year. He said recently the government had come up with another indirect way of harassing businesses by levying 0.3% withholding tax on all bank transactions above Rs50,000.

“Traders want full documentation as they are paying indirect taxes in higher amounts than their actual tax liability,” he remarked.

Sheikh pointed out that 100 million mobile phone subscribers paid both income tax and sales tax on their bills and 13 million power consumers paid general sales tax and those with higher bills gave withholding tax as well.

He said the income tax filers were entitled to receive refund of all withholding taxes they paid. “However, no refund has ever been made.”

Published in The Express Tribune, August 28^th,  2015.

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