LAHORE: The current government may not pursue a new National Finance Commission Award, said former finance minister Dr Hafiz Pasha, while speaking at the 2nd Consultative Session of the National Finance Commission (NFC) Award organised by PRIME Institute.
Calling for full implementation of the 18th Constitutional Amendment, he said double taxation by different levels of government on the same tax base should be avoided and instead there should be harmonisation of tax rates among provinces to avoid competition for the same tax base.
“It is imperative that the horizontal sharing formula of the NFC Award be updated after the census,” Pasha said.
He called for creating incentives not only for resource generation, but also for their allocation.
The former finance minister also proposed that conditional grants should be provided to those working on priority areas of the federation such as education and health.
Speaking on the occasion, tax expert and lawyer of Supreme Court, Dr Ikramul Haq, said taxation rights were not distributed fairly between provinces and the centre. He noted that disputes between the provinces and the centre arose because the provinces were not allowed autonomy to determine the tax policy.
He called for a clear demarcation of the jurisdiction to avoid conflicts over revenues between the federating units and the centre.
Haq also expressed concern at the immense level of double taxation in the system and called for major sales tax reforms.
Scholar and businessman Najaf Yawar, during the question-answer session, said Pakistan government needed to identify the optimal level of taxation. If provinces were to compete in tax rates, smaller provinces would choose low rates to attract investment, he said.
Legal academic at the Lahore University of Management Sciences and former president of the Pakistan Bar Association Zafar Kalanauri pointed out that Pakistan had a low literacy rate, because of which the tax system needed to be extremely simple for compliance.
Meanwhile, business community representative Zahid Hussain was of the opinion that 16% was not a viable rate of sales tax as many consumer products lost value for buyers at such a high rate.
“People who are not even taxable are paying taxes in the form of withholding taxes,” he said.
After the first two meetings in Islamabad and Lahore, further consultations are planned on the NFC Award in Peshawar, Quetta and Karachi.