‘Tough tax regime dragging down economy’

ISLAMABAD: An extremely high corporate tax, the third highest in the world, according to a World Bank (WB) report, is one of the biggest reasons behind non-corporatisation and non-documentation of economy in Pakistan, an expert said on Thursday. 

“Administrative burden of tax compliance is hardest in Pakistan, where firms have to make 47 payments and spend 594 hours dealing with tax regulations compared to 12 payments and 175 hours in high-income states in Organisation for Economic Cooperation and Development (OECD),” Dr Ikram-ul-Haq, a tax expert, told a meeting held at Board of Investment (BoI). 

Dr Haq pointed out that 87 percent time spent on dealing with taxes (or 514 hours per year) in Pakistan is spent on VAT compliance. “Pakistan’s real dilemma is that our tax base is very narrow. In 2014, 2015 and 2016, less than 4000 persons paid tax between Rs1,000,000 and Rs10 million. In 2014 just 3,663 declared tax of over Rs10 million and this position worsened in 2015 as per Tax Directory 2015,” he said. 

Mian Shaukat, a representative of the FPCCI, observed that Pakistan’s tax regime was not only complex but also noncompetitive compared to the regional countries.  “There is a need to simplify the tax procedures and reduce the multiple taxes by merging those taxes, which are not contributing much to the revenue,” Shaukat said. Going forward, he also termed the division (created) between filer and non-filer as counterproductive. 

Mansoor, an official from Allied Bank Limited (ABL), highlighted the difficulties being faced by taxpayers as well as withholding agents for compliance.