Pakistan’s tax assessment system needs essential changes to prompt development of the national economy. Fiscal policy and tax administration are crucial for businesses in the formal sector to compete on an equal footing with those in the informal sector.
These views were expressed by Pakistan Business Forum (PBF) Additional Secretary General Dr Urwa Elahi while talking to APP here on Saturday. She said that the capability and capacity of the Federal Board of Revenue (FBR) to implement policies and the political will to pursue those outside the tax net were required for these reforms.
She said any action taken in a hurry for instant tax revenue would affect the profitability of formal sector businesses as well as the tax collection system. “Taxes ought to be straightforward, foreseeable, and in favour of business expansion and the formalisation of economy. It should be the goal to increase tax revenues by expanding the tax base and improving the profitability of current taxpayers. Currently, the sector that accounts for 20 per cent of GDP contributes a disproportionate 56 per cent of taxes. More jobs should be created, value-added exports should rise, and sensible import substitution should be encouraged. Taxes should be looked at in relation to manufacturing and commercial importers, as well as corporates and other types of business structures like Association of Persons,” she elaborated.
Dr Urwa asserted that corporations, particularly those which were listed and adhered to a higher standard of governance and accountability, their owners and shareholders should not be penalised. According to the PBF office-bearer, the wholesale, retail, and real estate sectors had the potential to bring in Rs747 billion in tax revenue.
She explained that by raising the initial investment required to cover the tax that must be paid in early loss years, minimum tax based on turnover acts as a barrier to new players’ entry.
Because this is a simpler option than assessing taxable profits, FBR’s reliance on minimum, advance, and withholding taxes has increased significantly. It is necessary to gradually phase out this reliance.—APP
