Former finance minister Shaukat Tarin said on Saturday that the Federal Board of Revenue (FBR) needed a thorough surgery in order to improve tax collection.
Addressing the Economic Summit, 2011, organised by the American Business Council of Pakistan (ABC), Tarin said that the government did not balance its books. “There should not be any sacred cows when it comes to taxing the rich. Anyone who is earning money must pay taxes.”
He said that the country’s tax-to-GDP ratio should be increased to 15 per cent in five years, which currently stands at 8.9 per cent.
He said that public-sector enterprises were costing the country $5 billion every year. He said that privatisation of state-owned enterprises should be expedited. “Our strategy should be to turn around these companies and sell them. The government has no business doing business.”
He criticised the agriculture sector for not paying taxes and shying away from value-addition. He said that its growth rate in the past decade remained around 1.5 per cent. “We produce 25-30 mounds of wheat per acre while other countries produce 60-70 mounds per acre.”
Speaking on the occasion, AF Ferguson and Company partner Shabbar Zaidi said that unlike the trend all over the world, Pakistan’s economy was moving from the regulated sector to the unregulated sector.
He said that Pakistan was perhaps the only country where the effective tax rate for incorporated companies was higher (35 per cent) than non-incorporated companies (20 per cent).
Zaidi called for decentralising the regulatory framework, saying that businessmen didn’t like to deal with the FBR, State Bank of Pakistan (SBP) and Securities and Exchange Commission of Pakistan (SECP). Zaidi said that medium and large businesses should ideally have a 60 per cent share in GDP. But in Pakistan’s case, he said, they contribute only 30 per cent to GDP.
Addressing the summit, Karachi Stock Exchange (KSE) Managing Director Nadeem Naqvi said that Pakistan lost about two per cent of GDP because of the electricity shortage every year. Referring to a report, he said that the power crisis, in addition to the security situation, was likely to cost the country another 3.7 per cent of GDP in fiscal 2011-12. “This means we’re going to lose 5.7 per cent of GDP to power and security crises in the current fiscal year.”
In contrast to other speakers who referred to Pakistan’s population as ‘human resource,’ Naqvi called it a ‘tsunami of ignorance,’ adding that the standard of business education in Pakistan was dismal. “Most MBAs I meet cannot speak for two minutes in an articulate manner.”
Replying to a question during the question and answer session, Tarin said that retailers from across the country paid only Rs75 million in taxes every year. He said that no restaurant in the country paid a single rupee in taxes.
Oxford University Press (OUP) Managing Director Ameena Saiyid, who was present in the audience, disagreed with Zaidi, saying that she had to pay protection money in Korangi, which she called a hotbed of bhatta. “I pay taxes through the nose. Yet I have to pay bhatta.”
Published in The Express Tribune, September 18th, 2011.