Experts call for ‘deep-rooted’ tax reforms

Updated September 14, 2019

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Economic experts say higher tax collection can only be achieved with a growing economy and similarly devaluation of the rupee alone cannot help increase exports without broadening the industrial base. — AFP/File
Economic experts say higher tax collection can only be achieved with a growing economy and similarly devaluation of the rupee alone cannot help increase exports without broadening the industrial base. — AFP/File

KARACHI: Economic experts say higher tax collection can only be achieved with a growing economy and similarly devaluation of the rupee alone cannot help increase exports without broadening the industrial base.

Speaking at the inaugural session of three-day international workshop on best global practices of VAT/GST, organised by International Bureau of Fiscal Documentation (IBFD), Netherlands in collaboration with Sindh Revenue Board (SRB), they were critical about a large number of taxes being collected with high tax rate and suggested for early rationalisation of tax rates and reduction in number of taxes.

They further said that by devaluation of the rupee exports could not be enhanced therefore it was equally important to consolidate industrial activity for achieving growth in exports.

The industrial base of the country on the contrary has shrunk rather than recording growth, they observed.

Former finance minister Shaukat Tareen expressed deep concern over the current economic condition and suggested there was urgent need for introducing deep-rooted reforms with structural changes in tax collection if revival of the economy has to be witnessed.Tareen was critical that the National Finance Commission (NFC) award and said this made central government financially weak because under distribution formula more resources go to provinces.

He further said that an economy with huge frontload of taxes cannot grow and as such there was an urgent need to reduce expenses, rationalise taxes and increase resources if sustainable growth has to be achieved.

Unfortunately, he said, the manufacturing sector which contributes up to 18 per cent in GDP has to contribute up to 80pc in revenue collection. Therefore, provinces must impose agriculture tax to ensure equitable contribution in tax collection.

Institute of Business Administration Dean Farrukh Iqbal said that growth in tax collection could only be achieved in growing economy therefore he felt that economic growth was more important than growth in tax collection and the government was more focused on later.

He further said that presently around 50 taxes are being collected and there is a need to reduce the number as well as cut in rates for which tax system has to be re-designed.

SRB Chairman Khalid Mahmood said for the last three consecutive fiscal years the board had been recording revenue collection growth of around 28 per cent.

Published in Dawn, September 14th, 2019