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February 22, 2019

Pakistan needs simplicity, transparency in taxation to build confidence

Business

February 22, 2019

LAHORE: Robert Stenhouse, global president, Association of Chartered Certified Accountants (ACCA), said Pakistan needs a simple and transparent tax system to build public confidence in its taxation regime.

Simplicity and transparency were essential if the benefits of paying taxes were to be understood by the society as a whole, he said in an interview during his maiden visit to Pakistan.

“These characteristics also help establish certainty around tax positions, which is vital for ease of doing business. Unnecessary uncertainty, in any shape or form, is not good for businesses and as a result adversely impacts growth and investment,” the ACCA president said.

Pakistan needed tax simplification so that taxpayers understood what they were paying for and they should also be helped understand the benefits of paying taxes. To achieve this, the tax laws should be as simple as possible, and this simplicity should also be reflected in the tax administration.

“Complexity distorts behaviours, whereas certainty promotes efficiency. We believe there are some key tenets which countries should apply to build a healthy tax culture. Simplicity isn’t easy to achieve, but if Pakistan embraces the positive features of technological advances it should be possible to secure it for the majority of taxpayers,” Stenhouse said.

Quoting the example of Brexit, Robert said, UK’s economic growth was being impacted by uncertainty around the Britain’s exit from the European Union. This political uncertainty has impacted both local and foreign investment decisions.

“Uncertain tax conditions are just another flavour of political uncertainty. Simplicity removes a level of risk from financial decision-making and makes it easier to do business,” he added.

Having established an effective tax system, the next job was to explain how the tax revenues were being used. Effective public sector management was crucial if public trust was to be achieved through transparent and timely reporting. “It will be impossible to communicate the benefits of paying taxes to society if there is no transparency around how the income was utilised,” Stenhouse said while stressing on the need for transparency in the taxation system.

On the role of professional accountants in prevention of white collar crimes and corruption, Robert said first and foremost, professional accountants should be able to identify the characteristics of transactions that could be used for money laundering. So, they could be identified and reported before they were processed. Talking about the China’s Belt and Road Initiative, which also includes China-Pakistan Economic Corridor, the ACCA president said he believed there was huge opportunity and everything should be utilised for mutual benefits of both China and Pakistan.

“We already work closely with governments, corporate sector and educational institutes in Pakistan and China to facilitate Belt and Road related development. So we see our role as a professional body to be a ‘super connector’ – with members working across many of the countries alongside the route, many of them are already supporting BRI projects. We have case studies which talk about how they can help clients manage cross border trade and also understand the logistics behind this huge infrastructure project,” he added.

Robert said ACCA believes that accountancy develops and sustains economies. The profession and its commitment to work in the public interest were increasingly gaining more importance as an enabler of growth.

“Our key activities in Pakistan are to support our members, our students and also work closely with employers and learning providers to build the profession Pakistan needs. We also work to build relationships with the government and regulators, where we advise on key policy issues,” he added. ACCA sees the future as a place where the profession would be shaping the economic and social agendas. Talking about the increasing automation of finance functions and globalisation, ACCA’s president said that technology and automation were already impacting the profession and would continue to change how we all worked.

“Digital is arguably the biggest factor shaping the future of the profession and the future roles our students and members will perform. There are many different technologies impacting the profession: automation, robotics, cloud, cyber, social, AI and blockchain. In earlier research we identified digital as one of our seven professional quotients for success,” he said. He informed that a digital research programme was established for machine learning, etc.

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