‘Restructuring tax regime central to realising potential’

ACCA global head says Pakistan needs to lower some taxes to unleash growth

LAHORE: Drawing attention to one of the country’s crucial development factors, Association of Chartered Certified Accountants (ACCA) global head of taxation Chas Roy Chowdhury said that the government needs to focus on broadening the tax base instead of imposing further duties.

He stressed on strengthening the tax regime by lowering some major taxes.

“Pakistan is a relatively young economy, with potential to grow further,” said Chowdhury. “However, for this purpose, the government needs to engage with the business community.”

Recent data reveals that the business community and the common man are willing to pay taxes regularly and the government is also keen to engage with them, which is encouraging, he added.

Chowdhury said broadening the tax network can open up the economy of a particular country. “A proper tax structure helps businesses grow, invigorate the society and improve social welfare.”

He stated that the government is currently making efforts to broaden the tax base; the introduction of withholding tax on bank transactions, though controversial, is part of its efforts to bring in the traders community in the tax net.

“Additionally, several other taxes have been imposed to shrink the budget deficit which for the fiscal year 2014-15 was 5.3% of GDP.”

Suggestions

However, Chowdhury said that the government can make tax slots of different categories to broaden its tax base by lowering the rate at the bottom. He emphasised on the need to lower the corporate tax that adversely affects development.

Currently, the corporate tax rate in Pakistan is 32%, which has been brought down from 34% in the last two years. India, on the other hand, has a corporate tax rate of 30%, United Kingdom’s is at 20% and in the US it ranges from 15%- 39%.

“It should be reduced to at least 20%,” he said, adding that in the next four years corporate tax in the UK is expected to further decrease to 18%.

Chowdhary clarified that in developed economies lower corporation tax rates do not mean low tax collection; collection goes up as businesses invest further.

“There are some countries which have low or zero taxations, and despite this they have managed to turn in to modern economies”, he said while pointing to the UAE and Singapore as examples.

Published in The Express Tribune, February 7^th, 2016.

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