Priority: Limit FBR’s authority and restructure tax system

KCCI urges government to implement reforms to improve collection.

KARACHI: Karachi Chamber of Commerce and Industry (KCCI) Acting President Muhammad Ibrahim Kasumbi has urged the government to review the entire tax regime and enforcement structure. He said there was a need to devise a clear strategy to put an end to the massive discretionary powers of the Federal Board of Revenue (FBR).

“The massive discretionary powers granted to various departments during the past couple of years has only been focused on further squeezing the existing taxpayers,” he said, adding that majority of the wealthy population stays outside the tax net due to lack of an effective mechanism along with massive corruption.

Highlighting KCCI budget proposals forwarded to the federal government for consideration, Kasumbi pointed out that Pakistan could not afford to be lax over its tax structure and needed to restructure the entire system.

He was of the opinion that the existing direct and indirect taxes have created distortions in the economy while the FBR has not been able to broaden the tax base and continues to rely on indirect and withholding taxes. Stressing the need to bring down GST to a single digit, the KCCI acting president noted that despite the high rate of General Sales Tax (GST) and an additional 3% on commercial imports, the net collection after refunds and adjustments was low.

Kasumbi also underscored the need to separate policy making process / tax legislation from enforcement and administration, curtailing discretionary powers, and minimising personal contact between the taxpayer and Inland Revenue (IR) officers.

The current tax regime discourages new taxpayers to register, as there are many opportunities to earn a decent profit from investing in the undocumented economy, he opined.

He said that an unconventional approach and some difficult decisions must be taken to ensure that burden of taxes is evenly distributed and does not entirely burden the middle and lower income sections of society.

Referring to the FBR’s power to call for information on bank accounts, Kasumbi suggested that such access may only be granted by competent courts of law in exceptional circumstances and cases of substantial evasion where adequate evidence is available. “It will help restore confidence of investors and create a business-friendly environment to promote growth,” he added.

Published in The Express Tribune, May 12^th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.