ISLAMABAD: Pakistan is fast losing its investment-friendly image due to increasing tax burden on the few foreign investors, and it needs to address this challenge through a fair taxation system in the upcoming budget, Overseas Investors Chamber of Commerce and Industry (OICCI) said on Tuesday.

Speaking at a news conference, President OICCI Bruno Olierhoek and Secretary General Abdul Aleem urged the government to ensure predictable tax policies in the upcoming budget. The chamber suggested abolishing the super tax that was imposed for one year but continues into the fourth fiscal year, and reducing corporate tax rates to boost foreign direct investment.

Mr Aleem said Pakistan has the potential for large foreign direct investment (FDI) due to its massive population and a growing economy which could not be fully exploited so far due to various reasons including weakness in governance and policy implementation.

He said the OICCI had submitted very comprehensive taxation proposals to the Federal Board of Revenue and provincial revenue authorities to make Pakistan an investment friendly country at par with many of the successful regional countries.

Mr Bruno explained that most of the recommendations to the government were focused on taxation. He said the government should eliminate 3-4 per cent super tax as per promise made initially and reduce corporate tax rate to 25pc from existing 38pc in line with the regional practice where the rate is 22pc.

He said the OICCI also wanted uniform sales tax rate should be 13pc across the country as in Sindh and then to 10pc, in line with the average rates in the region. He said different GST rates in various provinces and the centre were resulting in complications and double taxation.

He said the tax on undistributed profits and tax on bonus shares should be abolished while tax matters among the provinces and the FBR should be resolved in a timely manner and refunds paid under scheduled flows to ensure predictability.

The chamber also sought an end to minimum tax. Alternate tax regime should be abolished and withholding tax regime should be revamped to just 5 rates from existing 55 rates, the chamber added.

Mr Bruno said taxation policy incentives for investment should be for a longer term so that green field investment with longer time required to develop investment plans were attracted.

Mr Bruno said there should be no regulatory duty on raw materials. He said there was no secret that Pakistan was getting less than 1pc of its reported GDP in new FDI, including for CPEC investment in recent years which was well below the norm in the region.

He said the authorities in Pakistan should understand the factors which boost FDI, and exports, in some of the regional countries including Vietnam, Indonesia, Thailand and Malaysia so as to adjust policy action to boost FDI inflow in Pakistan.

The chamber has recommended certain visible actions to attract large FDI from across the globe to boost manufacturing, employment and exports for Pakistan. These include an institutionalised forum for raising investors’ issues at the senior most federal and provincial government level and proactively manage negative perception of the country through active communication of the progress achieved in various segment of the economy and the opportunity available for investors in industry, infrastructure and trade.

Also, the chamber stressed that the federal, Sindh and Punjab governments should deliver on an action plan to significantly improve on Pakistan’s poor ranking on World Bank’s Ease of Doing Business and immediately resolve the growing number of issues relating to taxation, tax refunds and the circular debt.

Published in Dawn, April 18th, 2018