Another persistent issue: Years on, experts still lament taxation system

Tax Reforms Commission chairman says reforms needed; stringent enforcement a must.

ISLAMABAD:

Tax collection is the most important issue that has plagued the country’s economy for decades.

Years of inadequate collection has resulted in deficit after deficit with steps to improve the country’s tax machinery yielding little result.

One of the issues deals with how collection is estimated and revised as the fiscal year goes by.  Tax Reform Commission of Pakistan Chairman Masoud Naqvi said Pakistan should abolish the collection of advance taxes as well as withholding of tax refunds for a year, which may result in fiscal deficit but would give a “realistic assessment of revenue collection capacity”.



He was addressing the National Tax Summit jointly organised by the Sustainable Development Policy Institute (SDPI) and Oxfam.

Naqvi suggested that Pakistan should adopt major structural and policy reforms for improving tax collection, which has regressed over the last few years.

“It is a pity that the Property Development Authority of Dubai has provided Pakistan the list of Pakistani investors, but the government has not raised any tax demand on them. Whereas, in India, a stringent law has been passed and action on ground is being taken.”

He explained that, due to complications in establishing multiple sales tax rates, the government is looking forward to giving a single rate this year, on which consultation with stakeholders is ongoing.  He said the tax on property is the most neglected area, which should be handled properly.  Former finance minister Dr Hafiz Pasha said the Federal Board of Revenue (FBR) collected at least 38% less than what was actually needed in the last two years. “Growth in domestic sales tax has gone negative in recent months.”

Earlier, SDPI Executive Director Dr Abid Qaiyum Suleri, in his introduction, asked if the country would move towards progressive taxation or the regressive trend will continue. He said another important aim was to define a balance between direct and indirect taxes.  Additionally, he spurred discussion on the role of provinces in sharing tax burden.

SDPI Deputy Executive Director Dr Vaqar Ahmed highlighted that provinces raise only 6.5% of the total tax revenue. “Tax administration machinery has a fragmented structure that promotes friction between provincial and federal tax collectors.”

He proposed that base line of untapped revenue in agriculture; services and property should be established to improve the situation. “Provincial authorities should restrain from giving preferential treatment through SROs and other concessions.”

Senior Economist Dr Akmal Hussain proposed that it is about time that a universal social security cover is given to the population. He said countries adopted the scheme even at a time when their economic situation was worse than that of Pakistan.

Published in The Express Tribune, March  5^th,  2015.

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