KARACHI, March 29: Chairman Central Board of Revenue Mr Abdullah Yousuf reiterated on Thursday government’s commitment to support business by creating a friendly tax environment and helping by way of cutting down on cost of doing business but made it clear that the days of giving assistance in form of dole out, high import tariffs and crutches like subsidies and rebates are over.
“We are moving ahead in a direction in which many countries of the world are going,” he declared at a pre-budget seminar on Thursday organised by the Management Association of Pakistan (MAP) while pointing out that the import substitution policy in past several years made the Pakistan business somewhat introvert and too much dependent on the crutches.
He conceded that textile had partly been helped by the government by way of research and development rebates but made it clear that the textile business will have to find ways of remaining in competition.
“We are very much concerned on the employment and export-related issues of textiles but then we will have to take a holistic view of the issue rather than providing dole and crutches.
“Exposure to world competition has brought out our weaknesses,” the CBR chairman said and explained that lack of management capabilities, relatively small enterprises and a high logistics cost are some of the issues faced by the Pakistan business, which is being addressed jointly by the government and businessmen.
He said that for the first time Pakistan’s business was on a head on competition with giant business conglomerates of China and India.
He said that the government had taken up the National Trade Corridor (NTC) that addresses the logistics issue from the floor of manufacturing plant in Pakistan to the gate of import house in foreign countries. The logistics, he said, add cost that is equal to huge 4 to 5 per cent of GDP.
Mr Yousuf did concede that the problems of energy supply and infra- structure had emerged as big challenges and pointed out several such challenges will have to be encountered as “we enter the unlimited world export market to get our share.”
As for improvement in tax administration, he said the government was addressing the issue through a two-pronged policy. There is a reform of tax administration programme and there are reforms through tax policies. As a consequence tax collection has shown 20 per cent improvement in collection during last two years.
This increase in tax collection, he said, is far above the growth in the GDP rate and, therefore, the tax-GDP-ratio increased by 0.25 per cent last year, which is set to further improve to 0.3 per cent this year. He said that the tax-to-GDP ratio was now 10.5 per cent and the government wants to take it to 15 per cent in next ten years.
This warrants enlargement in tax base and he pointed out that a very big segment of potential taxpayers -- the retailers and the wholesalers, the transporters and the agriculturist -- are outside the tax net.
The retail and wholesale business is 16 per cent of the GDP but pays only 3 per cent of the tax, the transporters are 12 per cent but pay only 4 per cent and agriculture is 22 per cent but pays less than one per cent of the tax.
However, he did not elaborate as to how these segments will be brought in tax net and whether the improvement in collection of tax on agriculturists by the CBR will need legislation as agriculture is a provincial subject.