FPCCI recommends cut in sales tax to 15%

Says high tax impacts inflation, promotes smuggling and tax evasion

ISLAMABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has termed the existing 17% sales tax ‘too high’ and has recommended the government to lower it to at least 15% in the upcoming budget.

In its recommendations to the government ahead of the budget for fiscal year 2018-19, the apex trade body has called for bringing down the standard sales tax rate, by either imposing a non-adjustable and non-refundable 7% sales tax at the single stage except for the high tax-earning sectors for the government, or reducing the standard rate to 15% in Value Added Tax (VAT) mode and then gradually cutting it further the following years.

“Prevailing rate of sales tax at 17% in Pakistan is too high as compared to other countries in the region … 17% sales tax rate and its procedure is the mother of several ills. Its higher rate stands in the way of its full collection. Being a consumption tax, it directly impacts inflation, promotes smuggling, encourages massive tax evasion and corruption,” the trade body said.

It also criticised the Federal Board of Revenue (FBR) for failing to complete the sales tax chain, due to which a large number of potential taxpayers such as retailers remain out of the net.

The body also called for striking down the discretionary powers of tax authorities such as posting Inland Revenue officers at business premises to monitor production, sales of goods, stock position, etc.

“Such discretionary powers are out-dated and create a perception of anti-business and anti-investment government policies and cause harassment,” it said.

“Repealing such powers will not only restore businessmen’s confidence, but will also reduce direct contact between a taxpayer and tax collector, which can lead to corruption.”

The FPCCI said omission of Section 45 of the Sales Tax Act in 2010, which abolished an independent adjudication system and vested adjudication powers in the same tax officers against whom the adjudication is sought, has been ‘disastrous’.

“The existing scenario is also against the basic maxim of law that no one can be a judge of his own case.”

Similarly, it said appeals by businesses against tax officers’ decisions should not be heard by a commissioner who belongs to the FBR and obviously he will not go against his own department.

“Appeals should be heard by a person who is not under the administrative jurisdiction of the FBR.”

The trade body also objected to other coercive measures by the tax authorities such as freezing of bank accounts for the recovery of arrears and powers to arrest on the allegation of tax fraud.

“A person having investment in the shape of industry cannot fly overnight to avoid trial … Persons having large manufacturing setups, public or private limited firms should not be arrested without trial,” the proposal said.

The federation also pressed for reviving the alternative dispute resolution committee comprising members from public and private sectors to resolve tax-related disputes.

Published in The Express Tribune, March 25^th, 2018.

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