The new paradigm: Lower tax rate leads to higher revenue: experts

Currently 89% of sales tax is paid by 100 companies

ISLAMABAD:

Economic experts have called for simplifying taxation systems and increasing revenues by lowering the tax rate.

Policy Research Institute of Market Economy (PRIME) held a seminar titled “Towards flat taxation, the new paradigm”, unveiling a breakthrough study aimed at increasing tax revenues by lowering the tax rate and simplifying the tax code.

The study was co-authored by Huzaima Bukhari and Dr Ikramul Haq. Bukhari claimed that by simply lowering taxes and eliminating complexities within the system, national internal revenues could be raised to Rs5 trillion annually.

Her proposals included a 10% tax on individuals, 20% on businesses, 5% single-stage sales tax and 5% single slab customs duty.

Her co-author Haq said Pakistanis were heavily taxed as a nation, paying 39% tax on services and a 14% adjustable income tax deducted at source. He revealed that 89% of the entire sales tax was collected from 100 companies.

Institute of Cost and Management Accountants of Pakistan (ICMAP) President Kashif Mateen endorsed the proposals on the grounds of justice.

He said complexities in the system created opportunity for corruption and discouraged individuals from compliance. He said the Federal Board of Revenue (FBR) imposed about 60 different withholding taxes.

Dr Shumail Daud, former president of the Rawalpindi Chamber of Commerce and Industry (RCCI), put his weight behind the proposals, stating that flat taxes were common sense.

He was positive that a simplified tax system would help raise revenues, broaden the tax base and encourage voluntary compliance.

PRIME Director Ali Salman lauded the study authors for their comprehensive work, stating that it would lay the foundations for long overdue and much-needed discussion on taxpayer rights and fiscally responsible governance.

Salman also announced the launch of the PRIME Centre for Fiscal Reform, a dedicated platform advocating reform in the areas of taxation, public debt and public expenditure.

Published in The Express Tribune, April 30^th, 2016.

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