KARACHI, Feb 22: The governor, State Bank, Dr Ishrat Hussain on Saturday said that, to broaden the tax net and enhance revenue collection, the service industry, which now constitutes about 50 per cent of the GDP, should also be taxed.

Without broadening the tax net and reducing the tax rate, he said, the burden of revenue collection as well as high incidence of evasion could not be checked.

Speaking at the concluding session of the two days national tax conference (Taxcon 2003) on ‘Tax Culture for Revival of Economy,’ the governor said that during 80s the tax-to-GDP ratio kept growing and stood upto 14 per cent but from 90s it began to retard.

As a result of a reversal in the growth of revenue collection, he said, there is an annual loss of Rs100 billion which is a substantial amount. If the growth in revenue collection had been maintained, presently there would have been Rs560 billion collection in revenue as against Rs460 billion being netted by the CBR.

Besides broadening the tax net the governor also stressed upon the need to reduce tax rate to discourage evasion. He said high tax rates work as an incentive for taxpayers and they are encouraged to evade taxes.

Dr Ishrat Hussain said that number of taxes should also be reduced and termed the taxpayers’ complain in this regard genuine and valid.

Another factor which adversely effects revenue collection, he said, is the multiple right of appeal, which could be placed from appellate tribunal to high court, supreme court and then a review petition. There should be only one right of appeal which should be dispensed with quickly.

He said no tax system could work if it is not fair, equitable and efficient, therefore, it is more important that the tax collecting institution should be equally geared up to meet the situation.

The SBP chief said that documentation of the economy has helped increase the number of taxpayers to 2.2 million from 1.7 million but it could be easily improved up to 3 million taxpayers.

During last three years, he said, the government’s entire energy was put on to revamp the CBR which has failed to enhance tax collection. He said that 85 per cent of CBR’s work force comprises lower staff and only 15 per cent officers are working as facilitators.

The president of the Income Tax Bar Association, Karachi, Abdul Qadir Memon advocated for bringing agriculture income into the tax net and said if revenue collection has to be improved there should be no discrimination and every category of income should be taxed.

The two days taxcon 2003, organized by the ITBAK witnessed various speakers deliberating on such topics as ‘evolution of tax culture in Pakistan,’ ‘Investment Promotion through Rationalization of Taxation,’ ‘Role of Judiciary for Creation of Tax Culture’ and ‘Professionals’ Facilitation in Development of Tax Culture.’

Later the governor, State Bank handed over shields of mementos to the organizers of the Taxcon 2003, and office bearers of the tax bar for holding a successful conference on tax.