Widening of tax base not possible without curtailing parallel economy: APBF



ISLAMABAD, AUG 15 – The All Pakistan Business Forum has stressed the need for widening of tax base, which is not possible without curtailing parallel economy, besides reducing present high ratio of tax rates, as country’s tax-to-GDP ratio has dropped to a record low.

APBF President Syed Maaz Mahmood, in a press statement issued here on Saturday called for broadening of tax base and creating jobs through industrialization, providing a competitive edge to Pakistan’s products in global markets through liberal investment policy and infrastructure development, as tax-to-GDP has been suffering a constant decline during 2019-2020 despite imposition of 17 percent sales tax on five major export sectors in budget and other taxation measures to the tune of Rs735 billion.

He said that the FBR’s policy of heavy taxation and over taxation on certain sectors did not provide any relief to increase revenue collection during 2019-2020, as harsh enforcement measures such as the condition of computerized national identity card numbers of the unregistered buyers further damaged the relationship between the tax collector and the taxpayers.

According to reports, calculations of the GDP, inflation, rupee-dollar parity and additional taxation data indicate that the tax-to-GDP ratio was 9.5 percent in 2019-2020; 10.1 percent in 2018-2019; 11.1 percent in 2017-2018; 10.6 percent in 2016-2017; 10.7 percent in 2015-2016; 9.4 percent in 2014-2015; 9.7 percent in 2013-2014; 8.7 percent in 2012-2013; 9.4 percent in 2011-2012, and 8.5 percent in 2010-2011.

Quoting the figures, Syed Maaz Mahmood stated that the FBR had collected Rs3,989 billion in 2019-2020, which was Rs82 billion more than the revised revenue target of 3,907 billion set for 2019-2020. He said that the revenue collection should have been increased during 2019-2020 due to rise in inflation, but the tax collection continued to decline during 2019-2020 because frequent changes at the top level of the FBR during the last two years have also sent a very negative message among the entire workforce of the FBR.

He said that another major issue was increase in smuggling during 2019-2020 due to import compression and substantial raise in customs duties, additional customs duties and regulatory duties on the imported items during 2019-2020.

The number of tax filers increased from 1.8 million in 2018 to 2.4 million in 2020 only due to the measure taken in 2018-2019. However, due to the lack of capacity of desk audit, the FBR failed to achieve desired results, despite increase in the number of filers, he said.

According to reports, the government took Rs735 billion worth of taxation measures in the budget 2019-2020, while the nominal GDP growth was projected at 15 percent, including 3% real GDP plus 12% inflation, which was required to help collect additional taxes of Rs574 billion. The growth in revenue collection in the first four months was at the level of nominal GDP growth of 15 percent.

APBF Chairman Ibrahim Qureshi said that the APBF is concerned over excessively burdening the manufacturing sector that contributed around 21% to the economy, having a share of 70% in tax payments. He added that the APBF have several time proposed a comprehensive action plan for the broadening of tax base and improving the tax-to-GDP ratio. He added that promoting foreign direct investment, increasing the share of direct taxes and slashing the slab of indirect levies topped the proposals presented by the All Pakistan Business Forum for the current year budget 2020-21. He said that the APBF had also suggested that the sales tax slab should immediately be curtailed in order to reduce cost of production and inflationary pressures.

Ibrahim Qureshi said that only political will and drastic steps can revive the economy, which should be grown significantly and constantly for visible impact.