Pakistan, India asked to aim for direct trade

Published October 8, 2015
James says routing goods via Dubai adds to costs for both countries and inflation goes up as a result.—AP/File
James says routing goods via Dubai adds to costs for both countries and inflation goes up as a result.—AP/File

KARACHI: Pakistan and India should not let politics get in the way of business if their economies are to flourish, said a World Bank economist on Wednesday, stressing both countries to aim for direct trade.

Talking to journalists on the last day of a workshop on sub-national taxation organised by the Sindh Revenue Board (SRB), Sebastian James, who works for the bank as a tax specialist, said routing goods via Dubai adds to costs for both countries and inflation goes up as a result. “This practice is totally inefficient. It will be a win-win situation all around should they trade directly.”

Also read: Trade with India: More prospects, less pitfalls seen

Through the three-day workshop, attended by 18 delegates from various countries, the SRB tried to make a strong case for devolution of sales tax on goods to provinces.

On the occasion, Sindh Chief Minister Syed Qaim Ali Shah said provinces were constitutionally entitled to collect taxes. “The people of Sindh need facilities for education, health, communication and opportunities of employment. For this, we need more funds.”

He said the past governments used to prefer Federal Board of Revenue for collection of sales tax on services for provinces and the share transferred to the provinces was based on population. As a result, Sindh, which was contributing 70 per cent of the total revenue collection, used to get only 23pc revenue share from federal government.

He acknowledged that Sindh’s revenue collection through services tax has been on the rise since the SRB, the provincial body mandated to collect GST on services, was set up in 2011.

On underutilising development funds, he passed the buck to the federal government for delaying transfers from the divisible pool.

Earlier during his presentation, Mr James observed that a negative list for taxing services can bring positivity as it would make things simpler.

He said most countries are shifting from positive to negative list, which includes only those services which will not be taxed. In an ideal world, such a list can be as simple as: “service means anything which is not goods.”

The Sindh government is planning to substitute the existing positive list of taxable services with a negative list.

Other participants who spoke on the occasion included Sher Shah Khan of the World Bank; Chris Evans, a professor of taxation at Australia’s University of New South Wales; and Catherine Bennett, a former assistant commissioner of the Canada Revenue Agency.

Published in Dawn, October 8th , 2015

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