KARACHI: The American Business Council of Pakistan (ABC) submitted on Wednesday its taxations proposals for the upcoming budget, urging the government to widen the tax net and ensure that all sectors of the economy are taxed appropriately.

With Pakistan having one of the lowest tax-to-GDP ratios in the world, it is imperative for the government to identify new sources of revenue, the council said.

“The ABC strongly advocates that the government should focus on meaningful reform to increase revenue collection. More importantly, efforts should be made identify those who have so far kept themselves out of the tax net,” commented ABC President Nadeem Elahi.

The detailed document, prepared by the council’s finance and taxation subcommittee, includes proposals for the elimination of 8.0 per cent minimum tax on services and calls for the applicability of a standard income tax across all businesses. “The current minimum tax regime has rendered businesses with margins lower than 8pc as unviable,” the council said.

The proposals call for sales tax to fall under value added tax (VAT) mode, allowing full adjustment of inputs. The ABC also urged the government to review the taxation structure for salaried individuals as “unjustified increases in the tax rate are contributing to an outflow of talent”.

In order to promote foreign direct investment (FDI), the council has proposed that the qualifying period for tax credits under section 65(d, e) should remain in place without any bindings of time as companies evaluating investment plans in Pakistan would include these incentives in their feasibility plan.

The ABC believes that the legitimate sectors of the economy were disproportionately targeted in the application of tax laws.

Published in Dawn, April 21st, 2016