‘Pakistan lacks culture of tax compliance’

KARACHI: Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan has said that the country lacked culture of tax compliance and there is an urgent need to reform the taxation system by engaging all the stakeholders.

“Efforts of ICAP in advising government in budget preparation, particularly in suggesting amendments in revenue laws are commendable and proposals received from ICAP were duly considered in formulation of the Finance Bill 2016-17,” Haroon Akhtar said at a post budget seminar organized by Northern Regional Committee of ICAP.

In a series of “post budget seminars”, organised by the Southern and Northern Regional Committees of the ICAP in Karachi, Lahore, Islamabad and Faisalabad, respectively, tax experts unanimously agreed that the new tax system automation measures would help reduce the discrepancies in the sales tax returns filing and would strengthen the system.

Presenters on Indirect Taxation praised Government’s decision on the implementation of new module. Speakers believed that the automation will minimize the reporting errors and strengthen the right of input tax claim. In case of any subsequent negative marking against the supplier such as non-active, blocked or blacklisting, the burden will entirely shift to the supplier.

With regard to tax on retailers, speakers proposed the government to review its decision of reverting back to turnover tax regime.

“It’s just only two years back when FBR had mandated registration for tier one (1) retailers and reverting back to turnover tax regime manifest not only indicate failure of the registration drive but also admission of such collapse,’ one of the speakers said and added that such short-term measures will hamper expansion of tax net and discourage existing taxpayers.

Presentations on Direct Taxation highlighted the salient features of the Finance Bill 2016 while giving detailed explanation in respect of each key feature.

The speakers believe that promotion of corporatization of businesses, by rationalizing gross incidence of tax and compliance burden, dedicated policy measure to tap sources of income and identifying with non-filers and under declaration was lacking in the Bill.

Speakers appreciated providing exemption to CPEC companies and certain incentives for industrialization.

In panel discussions, panelists opinionated that most of the income tax proposals lead towards ad-hoc tax collection measure instead of focusing to develop and improve documentation and broadening the tax base.

Need for structural reforms in taxation remain to be a dire need, not only to shift the concentration of the FBR’s tax revenue mix from indirect taxation to direct taxation but also for enhancing tax base.