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PR No. 277 Islamabad

Mr. Azher Ali Choudhry, Secretary, Board of Investment chaired a meeting consisting of the representatives from the FPCCI, Ministry of Commerce, Ministry of Industries & Production, Ministry of Human Rights, SECP, Finance, State Bank of Pakistan, Federal Board of Revenue, National Tariff Commission and Prime Minister Delivery Unit. The objective of this meeting was to reform taxation regime in order to take steps to ease payment mechanisms for local and foreign investors.

 

Dr Ikram ul Haq who is a well-known figure in the field of taxation pointed out that One of the major factors behind non-corporatisation and documentation of economy is extremely high corporate tax, the third highest in the world, according to a World Bank report. While referring to the doing business index of World Bank he stated that Administrative burden of tax compliance is hardest in Pakistan where firms have to make 47 payments and spend 594 hours (or 74 man days per year) dealing with tax regulations compared to 12 payments and 175 hours in high income OECD countries. Eighty seven per cent time spent on dealing with taxes (or 514 hours per year) in Pakistan is spent on VAT compliance. Dr. Haq was of the view that Pakistan’s real dilemma is that our tax base is very narrow. In 2014, 2015 and 2016, less than 4000 persons paid tax between Rs1,000,000 and Rs10 million. In 2014 just 3,663 declared tax of over Rs10 million and this position worsened in 2015 as per Tax Directory 2015.

 

Representative of FPCCI Mr. Mian Shaukat said that the Tax regime of Pakistan is complex and not competitive with regional countries.  There is a need to simplify the tax procedures and to reduce the multiple taxes through merger of those taxes which are not contributing much to the revenue. He also presented his view that the division created between filer and non-filer is counter productive. Ms. Fareena from FBR also added that mechanism of enforcement is being strengthened.

 

Mr. Mansoor from ABL highlighted the difficulties being faced by tax payers as well as withholding agents for compliance. He said the software system designed by FBR is quite different by the software of Banking sector devised for banking transactions. He emphasized on taking all stockholders on board before designing or devising any policy/software.

 

Dr. Ikram ul Haq while concluding the session proposes, three Measures. The first one is the establishment of National Tax Tribunal as the litigation cost is very high in Pakistan.  Secondly,  Pakistan should establish  one National Tax/Revenue Agency to reduce the multiplicity of tax collecting agencies and thirdly, Pakistan should also have digitalization of the whole tax regime for which a very successful models are available in countries like Canada , Sweden ,and even Malaysia and turkey as well.

 

At the end Mr. Azher Ali Choudhry, Secretary, BOI thanked Dr. Ikram ul haq and Mr. Mansoor Zaigham, and other participants for their participation in the session.

 

 

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