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FBR liaison with businessmen must to widen tax base as active taxpayers decline

  • April 11, 2021

LAHORE – The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel chairman and FPCCI ex-president Mian Anjum Nisar has asked the government to enhance liaison with the business community, which is the real stakeholder, with a view to broaden tax base and enhancing tax-to-GDP ratio, as the number of active taxpayers has declined by 30% to just below 2.2 million.

Mian Anjum Nisar said that the FBR’s reforms initiatives were not bearing fruit, as the revenue collecting agency could increase the number of sales tax return filers by just 8 percent in first six months of the current fiscal year, mainly due to 40 percent rise in the type of those filers, who haven’t paid any tax, implying that bad governance and weak tax management of the tax department still persist.

There is an urgent need of reforming and simplifying the taxation system with the consultation of real stakeholders, besides addressing the issue of double taxation through integration of provincial and federal government laws and harmonization of FBR and Punjab Revenue Authority, he added.

It is unfortunate that just 30 percent of the total sales tax return filers are paying taxes while 70 percent of the filers have paid nil tax. The government’s new measures seem to be inadequate to convince people to file tax returns due to arm-twisting by the FBR, creating unnecessary controversy due to continuous raids on business premises.

He urged the authorities to introduce new tax incentives and extend the period of existing ones for attracting new foreign direct investments in line with the potential of the country. With a view to wipe out corruption there is a need to develop local software and apps with simplified system in Urdu so that interaction of human resource should be reduced, suggested the BMP chairman. 

Mian Anjum Nisar said that only direct taxes can improve tax collection, as the existing tax system is heavily skewed toward indirect taxation. He said the sustainable solution to Pakistan’s problems lies in the structural reforms, as we can see very large inefficiencies in tax collection, which needs to be removed. So, the tax compliance must be improved and tax base should be broadened, which cannot be achieved with a single policy change, but by a systemic approach.

It is a matter of concern that people want to pay additional tax on a business or personal economic activity but are not willing to become part of the tax system. According to FBR’s own Active Taxpayers List 2021 for tax year 2020, about 0.5 million people, who had filed returns last year, could not file the tax returns this year. He said businessmen are shying away from filing annual tax returns, as they are scared of FBR’s highhandedness.

He suggested that taxes should be charged one time by any provincial or federal government, as provinces levy same kind of tax which the federal government has already imposed, escalating the cost of production and discouraging the registered manufacturers. He called for harmonization of Sales Tax and Income Tax laws, getting rid of conflicting provisions, suggesting enhancing tax base by automation. He demanded the government to improve tax structure so that business and investment could flourish in the country, as the existing tax structure discourages investment. He requested the government to focus on reducing tax rates and expanding tax base by bringing all exempted sectors into the tax net.

He said that coordination between the government and the private sector was vital for economic growth, proposing the government to develop policies that could provide conducive business environment in the country. He called for strict measures to stop illegal trade, as the smuggling is not only causing massive shortfall in revenue collection but also discouraging the legal businesses and documented economy. Majority of the people don’t want to get them registered and preferred purchasing of smuggled goods mainly due to high duties on legal import.

“The BMP has been asking the Federal Board of Revenue to reduce the tax rates to help increase competitive edge of indigenous products in both local and global markets, as high tax rates provide incentives for tax evasion and corruption and results in high cost of doing business,” he suggested. He said heavy reliance on withholding taxes is affecting the enforcement capabilities of the FBR administration, since majority of tax collections is through the withholding tax regimes and not through enforcement measures.

Article source: https://nation.com.pk/11-Apr-2021/fbr-liaison-with-businessmen-must-to-widen-tax-base-as-active-taxpayers-decline

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