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KARACHI: Stressing upon the need for broadening tax base through reforms, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its budgetary proposals urged the government to slash standard sales tax rate from 17 per cent to 13pc.
The FPCCI’s advisory council on budget has compiled some lengthy proposals for the upcoming budget, covering major revenue heads including sales tax, income tax, customs duty, export related issue as well as important sectors and institutions.
The apex body of trade and industry suggested that standard sales tax rate should be reduced to 13pc in Value Added Tax (VAT) mode at first stage to align it with Sindh Sales Tax on service and thereafter reduce it gradually by 1pc annually.
“17pc sales tax rate and its procedure is mother of several ills. Its higher rate stands in the way of its full collection. Being a consumption tax, it directly impacts inflation, promotes smuggling, encourages massive tax evasion and corruption,” the body noted.
Opposing the posting of Inland Revenue (IR) officers at business premises, the body said, “That in the modern era of computerisation and available methods of monitoring the entire supply chain and production capacity of each industry, this outdated method should be done away.”
“The posting of IR does not allow direct contract between a taxpayer and tax collector which is against the government policy. It also leads to corruption and tax evasion,” it added.
The FPCCI is critical about the discretionary power for recovery of arrears under Section 48 and attachment of bank accounts.
It has been demanded that powers given under Section 2(37) on tax fraud and power to arrest and prosecute under Section 37A be curtailed as abuse of this law resulted in total defamation of the sale tax law and Federal Board of Revenue’s administration.
Such harsh provision of the law is one of the reasons for narrow sales tax regime during last 20 years, the body noted.
It demanded revival of Alternative Dispute Resolution Committee (ADRC) as it provides taxpayers an easy and efficient dispute resolution mechanism to resolve tax related disputes and to liquidate huge amount of tax arrears.
The FPCCI has urged the government to make it mandatory upon all official departments who record transactions or registration of documents, memberships, provide services, etc. to obtain Computerised National Identity Card (CNIC) or passport at the time of allocation, registration, transfer of properties and providing of or rendering of any type of services or assistance.
“By doing so the narrow tax base of around 1.2 million or 1pc of the population could be broadened and also help improve tax to GDP ratio which currently stands lowest in the region.”
Published in Dawn, April 22nd, 2018
