FPCCI appreciates PM’s directives on tax regime reforms

ISLAMABAD: The president of the Federation of Pakistan Chambers of Commerce and Industry, (FPCCI), Mian Nasser Hyatt Maggo, on Sunday, lauded Prime Minister Imran Khan for his visionary step to focus on tax regime reform, simplification of tax laws, plugging loopholes, minimising discretionary powers of tax collectors, and automation to bring transparency in taxing system.

The FPCCI president, in a statement, said he had already invited the attention of the prime minister through his earlier letter and it was encouraging that the PM was equally concerned with the tax reforms for acceleration in growth. He said the prime minister showed his deep insight on the issues that were impeding economic growth with great attachment to the business community. Maggo added that the PM has rightly taken up the issue to reform in tax regime. “The structure of taxation in our country is regressive through indirect taxing mechanism for the major of the total of federal government tax collection”, he further said. The FPCCI president said the tax collection is also disproportionate; as the industry is being overburdened with the tax payment of more than 60 percent against about 20 percent size in the GDP. He said the present tax structure was complex because of overlapping jurisdictions with different laws and the frequent policy-change almost on the daily basis by issuance of the instructions, clarifications, changing in rules, CGOs, STGOs, and ITGOs. The income tax, GST on goods, customs duties, and the federal excise were collected by the FBR, while the GST on services was collected by the provincial revenue boards/authorities, which also fragmented Pakistan into five business market economies, he added.

Nasser Hyatt Maggo said, “The withholding tax regime of over 65 in number is also hurting business cycle, while the businessmen have been made withholding agents to deposit the tax for the FBR”. The FPPCCI president said the tax returns should be simplified and easily understandable, particularly for the Small Medium Enterprises, (SMEs), and it should be made a single page document. “The present system requires almost all the tax returns filing persons to have further burden of by associating service charges of the tax consultants and lawyers, due to complicated tax return filing mechanism,” he noted.

The FPCCI chief said he had already written a letter to the PM, giving him various suggestions on required tax reforms, including complex income taxation to change flat rate taxation, taxation system to induce investments, multiple sales tax to change to single stage sales tax across-the-board with exemptions on food, live saving drugs, and educational instruments. Further the low rate custom duties without additional custom duties, and regulatory duties, were answerable to impeding connived smuggling and mis-declaration, he added. Maggo said the appellate tax system should be converted into independent tax judicial system in conformance with the required constitutional arrangements to gain the trust of the business community on the taxation system.

Maggo said the taxpayers’ bill of rights, protection of businessmen against retaliations by tax officials and accountability of tax officials should also be constituted as a fundamental requirement of the tax reforms. He said, “The FPCCI has been demanding the withdrawal of discretionary powers vested with the tax officials to avoid their misuse as presently the FBR has become show-cause generating machinery for existing taxpayers, as are being informed to us at large. He stated that to wipe-out corruption from the taxing system, there was need to improve automation and develop local software or Apps with simplified and user-friendly mechanism to reduce human interactions and to focus on technology to combat issuance of connived bogus sales tax refunds, which are not only affect government’s revenue but also damage business community’s credibility and trust.

Maggo appreciated the government for separating tax policy unit under the Ministry of Finance and not under the “Revenucracy Adjustment Methods” of the FBR, which had merely been making tariff rate adjustments and making changes in status on compulsions due to the observations of high courts and Supreme Court during the budgetary exercises.