Experts underscored the need for documentation of the national economy and income to drive reformed taxation regime intended to enhance tax net and regulate the untaxed sectors through a holistic and stakeholder inclusive intervention.
The Pre-Budget Consultative Workshop titled, “Optimizing Revenue and Public Spending for Inclusive Growth” was organized by Sustainable Development Policy Institute (SDPI) in collaboration with Revenue Mobilization, Investment and Trade (REMIT) and UK’s International Development Agency on Thursday.
Speaking via videolink, Louie Dane, the Senior Economic Advisor and Team Lead, Foreign, Commonwealth and Development Office (FCDO) said Pakistan has the youngest population and one of the fastest growing markets in the world. Moreover, it has the fantastic infrastructure and great potential for women to contribute to the economy and is trying to overcome its economic bottlenecks. “Pakistan needs to develop capacities to fight climate change,” he said, adding that though people have low incomes due to increased sale taxes, practical solutions and resources are needed to ensure inclusive development though a unified effort from all the partners of industry.
In his opening remarks, Dr Abid Qaiyum Suleri, Executive Director, SDPI said that COVID-19, conflicts, climate change and Gaza situation has put pressure on energy sector and the governments all over the world are compelled to do more. “We need to think revenue mobilisation without putting pressure on existing taxpayers which is an uphill task,” he added. He reminded that the European Union (EU) has implemented Carbon Border Adjustment Mechanism (CBAM) asking exporters to lower carbon emissions at each step of supply chain initially for steel, fertilizer, aluminum, cement, copper and others.
Keeping in mind the CBAM, Dr Suleri said, if the EU and the US can do it then China can also do it and Pakistan will have to decide to go greener; otherwise the government should start charging some sort of taxes as in EU and US.
Kamran Saeed, the Member Budget of Lahore Chamber of Commerce and Industry (LCCI), suggested that there should be an amnesty for undeclared foreign assets to increase liquidity in the market along with rationalization of fines, funds and penalties, pending refund issues and frequency of audits and penalty for nil filings. He called for the reduction in withholding tax and advance income tax, rate of minimum tax on turnover, and zero import duty on imported raw materials.
Mubasher Naseer Butt, the Chairman of Garments Industry Association, said the biggest hurdle is resistance to reformation of taxation system, which should be resolved. However, he added, tax base increase is not possible by integrating small retailers into the system but by taking the untaxed to the task.
Hasnain Cheema, the Sports Industry Representative, said that small and medium enterprises are the backbone of any economy especially the exporters, whereas the focus of the government and investors has shifted from the industry to the other sectors like real estate. He suggested a one-window taxation for the SMEs as they are not organized and lack knowledge to deal with govt departments, and the government should establish sector specific industrial estates on the concept of the modern world of linking academia and industry partnerships.
Syed Khurram Shah from Beverages Industry said the sector is deprived of a level playing field in terms of taxation that hindered its growth but despite that it showed substantial growth.
Ahmed Fawad from Footwear Industry said it is imperative to ensure good perception of the country for international investors and good business perception for local businessmen. However, it is also important to ensure consistency in the governments and policies whereas cost of doing business needs to be reduced in Pakistan, he added.
Yousaf from Surgical Sector said it is the 100-year-old sector in the country that used to generate over half a billion dollars revenue and had grown organically. “We are the largest exporters and manufacturers of surgical instruments with a global potential of $6 billion but it could grew to only half a billion dollars,” he said.
In his closing remarks, Ehsan Bhutta, Secretary Industries, Commerce, Investment and Skills Development said the government in the Punjab had established six business facilitation centers under one-roof to convene all government departments for expediting facilitation for the business fraternity. He said political stability and continuity of policy is very important and ownership of both industry and government was critical along with stakeholder input for refined policy endeavours. “Proper planning, motivation and strict check and balance will help ensure betterment in the system,” he added.
In the second panel discussion, titled: “Revenue mobilization without compromising growth”, Shahid Hussain, the Rector of LUMS, & CEO of Service Sales Corporation, said the trade growth is related to policy whereas in commerce more interaction should be done with departments concerned and stakeholders for informed decision-making. He said there is a trust deficit between government officials, industry and politicians, which needs to be addressed through consensus. “It needs to be probed that why the areas where more tax can be collected is not brought under tax-net. Resource mobilization is the important question and it is not possible without growth,” he added.
Member Tribunal ATIR, Tariq Chaudhry said the taxation on services and goods needs to be harmonized despite all efforts nothing convincing has been achieved, whereas the basic lacunas in the taxation system needs to be addressed.
Dr Suleri said that the major challenge is documentation of economy and the dichotomy faced is that the income which is documented is taxed. “We need income and economy documentation that can provide clear direction for direct taxation, therefore, mostly we have indirect income tax as mainstay. However, targeted mechanism is required for improving taxation system.”
Naeem Akhtar Sheikh, Chartered Accountant, Senior partner HSY said public trust is very important globally and there needs to be trust building measures to allow public to confess reasons for tax evasion for better regime.
“There is need to improve tax return process, its translation into local and national languages, and improvement in internal audit section of FBR needs to be strengthened,” he added.
Asad Feroz, Council Member, Institute of Chartered Accountants of Pakistan said there is need to promote a tax culture which is really lagging among the nation whereas audit and accountability needs to be started from the internal level of taxation authorities to encourage masses to participate in taxation actively through examples.
Saeed Umar Director Food Beverages said indirect taxes in Pakistan are much higher than direct and that’s why the government is on the former which needs to be reduced to increase tax net.
President LCCI, Kashif Anwar said there must be broadening of tax net and across the board same sales tax slab should be implemented for all the sectors to improve taxation.
During the third session on the ‘Role of the provincial government in inclusive growth’, Sohaib Ahmed Malik, Provincial Minister for Communications and Works, said infrastructure is important to ensure growth and development of a region and nation but it needs to be inclusive, cross sectoral and through joint ventures to have stakeholder intervention. “We need to take the issues in their historic, technical and social perspectives to come up with modern solutions. The departmental coordination and integration to work properly needs to be addressed for better strategies and initiatives,” he said. He also welcomed the experts to attend the international symposium to be organised by the Punjab Ministry of Communications and Works for sharing their recommendations.
Sumaira Samad, Secretary Women Development Department Punjab said the Department is new for the system as gender is a crosscutting sector whereas its going to oversee gender mainstreaming through the Women Development Department with the agenda as inclusive for women. The government of Punjab has been working to mainstream women in many areas but the major challenges are intersectoral and interagency lack of coordination, data on gender and implementation of laws, she added.
Aisha Sarwari, Senior Director Public Affairs, Coca-Cola Industry, said the sector was overtaxed and overburdened and facing problems due to incompetence of the government and its inability to broaden its tax net.
Syed Mehmood Hussain Jafari, Chief Commissioner LTO, FBR Lahore said there is need to have strong local governments which did not exist in Punjab and Sindh which is denial of 18th Amendment spirit, whereas there is no revenue generation effort at the part of the provinces.
In his special remarks, Ahmed Iqbal, Member of Punjab Assembly said there has been a transformation in the rural areas of Punjab that are flooded with school going children, water scarcity, energy crisis and issues pertaining to growth. He demanded an urgency on the part of decision makers to address pressing issues of poverty, poor municipal facilities and water scarcity.
Govt should facilitate TAX payers to attract people rather than filling tax department servants pocket with useless policies and legislative measures.