Tax reforms amongst top challenges: FBR official

Calls for parliament support to crack down on evaders.

KARACHI:

Tax reforms are the biggest challenge in the country after security concerns, according to Federal Board of Revenue (FBR) Inland Revenue Member Khawar Khursheed Butt.

Speaking at a seminar titled “Budget Proposals for 2011-12” organised by Institute of Chartered Accountants of Pakistan (ICAP) on Thursday, Butt said, “For the first time in my 35 years of civil service, I feel that there is a serious concern in the government to address the problems in the tax system.”

He agreed with experts that there must be an effective deterrence from FBR for tax evaders to discourage the non-tax paying culture in Pakistan. “People ask why FBR officials do not raid tax evaders like they do in India. This is something we can do only if we receive political support from the parliament,” he explained.

“The writ of the government has deteriorated in the last 30 years after we entered in to the Afghan war in 1979 – which also manifested the culture of tax evasion,” said Butt. He opined that tax officials must reciprocate the seriousness shown by the civil society to improve the tax system.

Speaking on the economic outlook for 2011-12, AF Ferguson and Company Partner SM Shabbar Zaidi said that Pakistan can easily bring Rs800 billion into the tax net without taxing the poor, which will resolve 90 per cent of economic problems. He urged the government to bring the middle-man into the tax net, claiming that middle-men earned more profits than growers by selling goods on higher rates.

Pakistan can also mitigate the problems of Afghan Transit Trade by promoting the role of Pakistan Railways as an alternative for road transport. Government has to increase the role of Railways, which will not only curb smuggling but also help in reducing cost of transportation, added Zaidi.

Giving solutions of the economic problems, he said Pakistan must open up regional trade, including its western borders with India, for long-term economic growth. He called on banks to offer around 10 per cent of their lending to the industry at lower interest rates, instead of just lending to government.

Former ICAP President Asad Ali Shah commented that the biggest problem of Pakistan was the tax-to-GDP ratio. Pakistan’s ratio of less than nine per cent is among the lowest rates in world.

Speaking on the issue of taxing agriculture income, Shah said the government could levy withholding tax on major crops, which would mitigate the problem of taxing agricultural income in the country. “We must also take the International Monetary Fund seriously if it says something logical. IMF is correct in asking us to introduce the value added tax (VAT),” he added.

Published in The Express Tribune, April 15^th,  2011.