ISLAMABAD: The Pakistan Institute of Devel­opment Economics (Pide), a state-owned think tank, has asked the government to shift gear from bureaucratic permissions to rule-based market liberalisation, exploit over Rs300 billion annual revenue potential from real estate through transparency, generate gains in agriculture sector worth Rs1.7 trillion and open up public land in Islamabad worth Rs2.2tr for private investment — all through immediate and widespread reforms led through firms specialising in digitisation.

In its ambitious reform advice, “ISLAAH: Immediate Reform Agenda — IMF and Beyond“, to the government, the think tank said the proposed plan would respond to Pakistan’s urgent need for external financing exceeding $120bn over the next five years.

This “is a clarion call for a systemic overhaul to ensure economic progress and prosperity, moving beyond the narrow interests that often dominate the discourse on reform in Pakistan”.

Dr Nadeemul Haque, a former deputy chairman of the Planning Commission and Vice Chancellor of the Pakistan Institute of Development Economics (PIDE), called for uniform tax rates across all sources of income, simplification and certainty of tax system, and tax harmonisation across the country.

PIDE calls for uniform tax rates across all sources of income, simplification and certainty of taxation system

“A central component of this strategy is the implementation of a ‘regulatory guillotine’ to eliminate burdensome regulations hindering business growth and innovation,” Mr Haque said.

“In our pursuit of economic efficiency, it’s imperative to shift from a system of permissions to clear rules, as permissions not only consume valuable time and resources but also incur significant documentation costs, both directly and in terms of missed opportunities.

“To achieve this, we must prioritise clear rules,

digitisation, and market liberalisation, putting an

end to the bureaucratic penchant for permissions and paperwork, thereby overcoming the ‘Permissionistan’ syndrome.

“Drawing inspiration from India’s successful reforms in 1991, it’s evident that piecemeal approaches won’t suffice. Instead, we advocate the implementation of a regulatory guillotine, a proven strategy adopted by countries like Hungary, Mexico, South Korea, and the UAE,” he said.

Dr Nadeem said the government should pay attention to streamlining taxes in a revenue-neutral manner while finalising budget proposals, with a commitment to refrain from introducing new taxes in every budget cycle as tax uncertainty and instability had driven investments underground, hindered firm growth, and impeded corporatisation and listing.

In addressing the income tax regime, Pide suggested a uniform tax rate across all sources of income, with provisions for agriculture income losses carry-forward and adjustment, along with the elimination of the presumptive tax regime and taxes on turnover.

It also called for uniformity in taxation for AOPs, sole proprietors, and corporations, alongside reforms in inter-corporate dividend income and asset sales taxation.

The think tank called for transitioning from withholding taxes to advance income tax mechanisms, besides harmonising the sales tax system across goods and services, expediting the implementation of POS through outsourcing within six months, and transitioning to a VAT mode with consistent rates.

Published in Dawn, April 3rd, 2024

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