The IMF’s Chief Citizens, Teresa Daban Sanchez, said that Pakistan’s tax collection is 62 per cent below its power but this level of FBR collection was comparable to the regional economy of its peers.
“Tax collection in Pakistan is 60 per cent higher than what is supposed to be collected at present but comparable to regional economies,” Rev. Teresa said during a one-day conference entitled “Better Taxes: Changing the Tax and Administration Policy Paradig” organized by PIDE here in P Paint in the hall at the Pak Secretariat on Wednesday.
He said Pakistan’s tax efforts are relatively low as they stand at 62 percent compared to the peer economies. The IMF official said the General Sales tax (GST) in its current form was creating competition, as it was a major challenge to increase exports. The lack of a co-ordination result is a huge burden for many companies and they are becoming disorganized, he added.
The GST crackdown, he said, exacerbated problems for taxpayers and outlined three ways to harmonize GST including the introduction of constitutional amendments, a second agreement between the federal and provincial governments to impose refunds and tax payments on third-party sites to find solutions through technology. GST is important in Pakistan and rising tax rates make the country’s tax system more difficult, he maintained.
He said Pakistan’s over-reliance on tax collection on imports is easy to collect. Currently, the country collects about 50 percent of its revenues from the import center including Customs Duty, Tax Withholding, GST, Customer Extension and Regulatory Expenses.
He pointed out that the complexity and distortion of the tax system makes tax structures difficult. Certain sectors, which contributed to GDP growth but whose contribution to the legislation were limited. In a statement, he said the increase in tax collections would provide more funding to meet the needs of the social sector as the share of protection for the poor increased and nearly doubled this fiscal year.
FBR Inland Revenue (IR) Member Policy Dr Hamid Ateeq Sarwar also spoke at the event saying that the culture of the wealthy and the crude economy has resulted in a tax / tax deduction for total and total tax deductions of Rs1.5 trillion for the current financial year of 2019-20 against Rs1 trillion in the fiscal year 2018 – 19 and tax expenditure figures were published in the final economic study of 2018-19.
He said tax exclusion creates problems for the tax system that is unfair because all sectors are beginning to struggle to get a tax deduction. He said the tax policy should aim to raise tax revenue but he said that various objectives are achieved such as providing incentives and encouraging investment. He said that instead of granting exemptions, the government should collect the necessary taxes and provide subsidies / grants when it wants to promote any specific sector.
This distortion, he said, led to FBR’s tax deficit in GDP estimates as it stood at 11.6 percent of GDP in 2017-18 which had already risen to 10 percent of GDP in 2018-19. Revenue growth is always negative as revenue collects from R3,842 million in 2017-18 to R3,829 million in 2018-19.
FBR, he said, agreed with the World Bank to reduce the Withholding Tax rate as the WHT rate stands at 62 which will be significantly reduced. The riding tax regime would be abolished, eventually.
He further stated that in the agricultural sector he contributed 18% of GDP and that the livestock distribution in agricultural growth accounted for 8% of GDP but continued in the informal sector and thus made it difficult to generate tax revenue.
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