Taxation system: Pakistan asked to follow China’s example

VAT reform has boosted China’s services sector.

LAHORE: China has undergone remarkable community development on the basis of taxation reforms and Pakistan can also go for a paradigm shift by following the example and creating a business-friendly taxation system, said Pak-China Joint Chamber of Commerce and Industry (PCJCCI) President Shah Faisal Afridi.

“China made taxation central to the economic development agenda and employed taxes as the principal means to transfer resources from private to public use,” he said.

He urged the government to revamp the taxation system in line with the Chinese model to let the business and revenue grow simultaneously.

He said China, a socialist state, had met needs of the entire society. Childcare, education, job placement, housing, health care and elderly care were largely provided and administered by state-owned enterprises.

“The reform of value-added tax has boosted China’s services sector and changed its position as the ‘world’s factory’,” he said, adding VAT was designed to replace business tax in the manufacturing sector to protect the tax revenue of local governments.

He regretted the prevailing taxation system and termed it ‘a source of harassment’ for the business community and a way of corruption for tax officials. “It is an embarrassment that we continue to beg others to come to our help when the solution is available within our own borders,” he added.

He asserted that like China, Pakistan should also set some realistic community development goals based on tax revenue rather than on foreign aid.

He said there is a need to create an optimal balance between a tax regime that is business and investment friendly, while at the same time leveraging enough revenue for public service delivery (which, in turn, makes economies more attractive to investors).

Published in The Express Tribune, April 3^rd,  2015.

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