KARACHI, April 3: The Chairman of the Central Board of Revenue (CBR), Riaz Ahmad Malik, has said that the tax laws remain inoperative in the tribal and Northern areas of the country and hence many distortions in the national economy.

Addressing the members of the American Business Council (ABC) on Thursday the CBR chairman said that quite a good number of ghee units have been set up in tribal areas to escape sales tax.

Similarly tribal areas virtually remain outside the jurisdiction of income tax and custom duties net.

Answering a question, he said the ultimate solution of the smuggling menace in Pakistan lies in Afghanistan. So far as the administrative measures to curb smuggling is concerned he said it was the responsibility of the interior ministry.

Riaz Malik informed the members of the ABC of the tax reforms underway for last several years which has brought about major changes in the tax administration system

“From taxing investment we have shifted our focus on taxing consumption”, the CBR chairman remarked while detailing the business executives of the shift in taxation policy. He said that five years ago, in 1997 the customs duty was generating as much as 50 per cent of the taxation revenue. It has now been reduced and sales tax is now the main revenue earner. He called customs duty a levy on investment and sales tax a charge on consumption.

He said that the rates of different taxes have also been reduced which he said has cost government exchequer a loss equal to 3.5 per cent of the GDP.

He justified the reduction in rates of duty drawbacks which he said has ensured quick refund with virtually no backlog. He recalled the days when CBR dragged with huge backlog of held up refund amounts of the drawback.

Earlier Arshad Nasar President ABC in his welcome remarks complained that tax rates in Pakistan were too high which affect the cash flow of the companies as well as hit hard the individuals.

He particularly mentioned 35 per cent rate on income of those who draw Rs700,000 or more in a year is too crippling and needs to be looked at again.