The chairman of the National Assembly Standing Committee on Finance, Qaiser Ahmad Sheikh said on Tuesday that he is not in favour of uniform taxation across the country.
Giving the example of the United States, he said people travel from New York to New Hampshire to shop, because there “is no tax in New Hampshire”. He said if there is uniform taxation across the country, no one would invest in provinces such as Balochistan and Khyber Pakhtunkhwa, adding: “There should be competition among provinces.”
Mr Sheikh was speaking at a consultative meeting on ‘Provincial Tax Reforms in Pakistan’, organised by the Sustainable Development Policy Institute (SDPI).
Before Mr Sheikh, a number of participants spoke in favour of uniform taxation and integrated taxes across the country so as to avoid double taxes. They also suggested an agriculture tax, arguing that the burden has been put on the business industry. The speakers said there were no incentives for taxpayers.
Speakers discuss merits of uniform, integrated taxation at consultative meeting
However, Mr Sheikh called it unfortunate that even agriculturists were not aware of taxes on the agriculture sector.
“The mark up for the agriculture sector is 14pc, and the mark up for the business sector is just 7pc,” he said. “That is why our agriculture sector has failed to compete with agriculture sectors of neighbouring countries, such as India, where the mark up is in the single digits.”
He said Pakistan has great taxation potential, and by taking the right measures the country could collect up to Rs5,000 billion, as Pakistan’s tax collection is 11pc of its GDP, but in India tax collection is 15 to 16pc of the GDP.
“However, we have made improvements in some sectors in the last few years, such as property taxes. People pay a huge amount while purchasing properties, but they declare a small amount as the cost of the property while transferring it. In the past, there was no tax on bank transactions, but by imposing a tax on bank transactions for non-filers, Rs30 billion were collected last year,” Mr Sheikh said.
Mr Sheikh also said that tax officers who send unnecessary notices should be investigated.
Earlier, the representative of the Rawalpindi-Islamabad Tax Bar Association, Ijaz Hussain, said the business community is suffering because of overlapping taxes – for example, a company that needs to transport products has to pay six different taxes that the provinces and the federal capital have imposed.
“Moreover, there is the issue of double taxation, as every province has its own taxes. There should be integrated taxes, and in case of differences provinces should settle issues with each other rather than issuing notices to the consumer or company,” he added.
Mr Hussain also said withholding tax – which is deducted on both services and goods and is only in Pakistan – is a big issue.
Chartered accountant Riaz Anwar said there should be a single tax return, which would make things easier for taxpayers. He added that provinces’ capacity issues also need to be addressed.
Mian Mohammad Ramzan, a representative of the Islamabad Chamber of Commerce, said the nation needs to contribute more for better services, but the “current liability of taxes is only on the business community”.
“Difficulties for the business community are increasing, as there are different taxes in different provinces. There should be the same tax across the country, and tax law needs to be enhanced. There is also a tax threshold in Punjab, but the same law is not implemented in Islamabad for businesses such as automobile workshops,” he said.
The general manager of a telecommunications company, Khalid Mehmood said GST is dangerous for business, because consumers take is as the cost of the product. “On the other hand, the Federal Board of Revenue sends notices of billions of rupees without doing any calculations,” he claimed.
Zulfiqar Hussain, a senior official from the FBR, said the board is working with the provinces to create a more harmonised tax system and safeguard consumer interests.
Other participants suggested the number of taxes – around 50 at the moment – should be reduced to encourage foreign investors, and health insurance cards should be issued to those who file their tax returns so people get the impression the government facilitates those who file returns.
Junaidi, Ikram. ‘Pakistan could collect up to Rs5,000bn in taxes’. Dawn, April 26, 2017.