Bridging budget gap: Experts call for balance between revenues and expenses
Say businesses require incentives to cope with scores of challenges
PHOTO: REUTERS
LAHORE:
Experts have underscored the dire need for maintaining a balance between revenues and expenditures as budget deficit forces the government to resort to borrowing that eats up a major part of the federal budget.
Tax and structural reforms and broadening of the tax net are the most appropriate solutions to this challenge.
Experts from the trade, industry and academia expressed these views while speaking at a post-budget seminar organised jointly by the Lahore Chamber of Commerce and Industry and the Institute of Cost and Management Accountants of Pakistan on Tuesday.
They insisted that businesses required incentives and facilitation for growth as industries were facing multifarious challenges including stiff competition from regional countries and power load-shedding at home.
However, the major bottleneck was the unfriendly tax system, they said while pointing out that the industry contributed 76% to the tax revenues while agriculture had a share of just 2%. The rest came from the services sector.
According to the latest tax directory, the experts said, the number of personal income taxpayers had increased from 752,695 in 2000 to over 1.074 million in 2015, but the number was still small compared to the 40 million people employed outside of the agriculture sector.
Similarly, the number of active corporate income tax (CIT) filers is 27,334 out of more than 60,000 companies registered for CIT and a mere 0.8% of the commercial or industrial electricity users.
In the sales tax regime, the number of enterprises registered for general sales tax is 178,190 out of about 1.4 million retailers and 3.4 million commercial and industrial electricity users. They said revenue collection was highly centralised with the federal government that collected over 92% of total tax revenues whereas provincial governments’ own revenues contributed the remaining 7.7%.
There has been a big increase in the share of withholding taxes in the income tax regime from 48.7% in 2006-07 to 68% in 2015-16.
Within withholding taxes, levies on exports, imports, contracts, salary, cash withdrawal and telephone and electricity bills are likely to be more regressive in nature. Contracts, imports and salary contributed 59.1% to withholding taxes in FY 2015-16.
LCCI President Abdul Basit pointed out that the share of direct taxes was not increasing in the federal and provincial tax systems. Their share was 38% in 2007-08 and in 2015-16, it marginally increased and contributed 38.34%.
“It is imperative to take special relief measures that facilitate business and restore the confidence of local businessmen,” he said.
Though energy and infrastructure development had been focused in the federal budget for 2017-18, a few other sectors needed immediate attention of the government, Basit said.
“Decline in exports is a bad sign, therefore, export-oriented industries should be given maximum facilities. Food sector should also be given zero-rated facility to get due share in the international halal food trade.”
Published in The Express Tribune, June 7th, 2017.
Experts have underscored the dire need for maintaining a balance between revenues and expenditures as budget deficit forces the government to resort to borrowing that eats up a major part of the federal budget.
Tax and structural reforms and broadening of the tax net are the most appropriate solutions to this challenge.
Experts from the trade, industry and academia expressed these views while speaking at a post-budget seminar organised jointly by the Lahore Chamber of Commerce and Industry and the Institute of Cost and Management Accountants of Pakistan on Tuesday.
They insisted that businesses required incentives and facilitation for growth as industries were facing multifarious challenges including stiff competition from regional countries and power load-shedding at home.
However, the major bottleneck was the unfriendly tax system, they said while pointing out that the industry contributed 76% to the tax revenues while agriculture had a share of just 2%. The rest came from the services sector.
According to the latest tax directory, the experts said, the number of personal income taxpayers had increased from 752,695 in 2000 to over 1.074 million in 2015, but the number was still small compared to the 40 million people employed outside of the agriculture sector.
Similarly, the number of active corporate income tax (CIT) filers is 27,334 out of more than 60,000 companies registered for CIT and a mere 0.8% of the commercial or industrial electricity users.
In the sales tax regime, the number of enterprises registered for general sales tax is 178,190 out of about 1.4 million retailers and 3.4 million commercial and industrial electricity users. They said revenue collection was highly centralised with the federal government that collected over 92% of total tax revenues whereas provincial governments’ own revenues contributed the remaining 7.7%.
There has been a big increase in the share of withholding taxes in the income tax regime from 48.7% in 2006-07 to 68% in 2015-16.
Within withholding taxes, levies on exports, imports, contracts, salary, cash withdrawal and telephone and electricity bills are likely to be more regressive in nature. Contracts, imports and salary contributed 59.1% to withholding taxes in FY 2015-16.
LCCI President Abdul Basit pointed out that the share of direct taxes was not increasing in the federal and provincial tax systems. Their share was 38% in 2007-08 and in 2015-16, it marginally increased and contributed 38.34%.
“It is imperative to take special relief measures that facilitate business and restore the confidence of local businessmen,” he said.
Though energy and infrastructure development had been focused in the federal budget for 2017-18, a few other sectors needed immediate attention of the government, Basit said.
“Decline in exports is a bad sign, therefore, export-oriented industries should be given maximum facilities. Food sector should also be given zero-rated facility to get due share in the international halal food trade.”
Published in The Express Tribune, June 7th, 2017.