KARACHI: Pakistani tax authorities are working on the concept of a single-digit sales tax rate, which is at present stands at 17 percent, with no refund/adjustment, while elimination of concessionary regime may help collect additional revenue of Rs400bn ($4bn), acting chairman of the Federal Board of Revenue (FBR) said.
“The withdrawal of sales tax exemptions and concessions may boost the annual collection of consumption tax by around 30 percent to 35 percent,” said Shahid Hussain Asad, acting chairman of the revenue body.
Sharing information about the progress for the formation of tax reform commission, announced by the federal finance minister in the budget speech, Asad said that the finance minister is not in the country and as soon he returns, members for the commission will be finalised.
“The commission will comprise finance experts, retired bureaucrats, civil servants and tax professionals,” Asad said. The statement to set up the commission came after the demand from the business community to bring down sales tax to a single-digit.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its shadow budget for the fiscal year 2014-15 had proposed that the sales tax rate should be brought down to a single-digit from the existing 17 percent.
The FPCCI estimated that by bringing down the sales tax to around five percent to seven percent with no adjustment and no refund would increase the revenue to Rs1,387bn in 2014-15 from the estimated Rs1,000bn.
The FPCCI said that the reduced sales tax would enlarge the size of the consumer markets and the government earnings would also increase.
“The figures are indicating the effective tax rate of general sales tax (GST) is less than five percent, which indicates that 71 percent of the total collection of sales tax has to be paid back in account of input adjustment and refund claims,” according to the FPCCI shadow budget.
The FPCCI advised that the culture of refunds should be abolished and the government should collect sales tax at the rate of five percent.
“It will transfer the benefits to the end consumers, which lead the control over inflation and poverty and enhancement in the economic activities,” according to the shadow budget. The FPCCI also said that exemption regime had created distortion in the tax system, besides resulted in rampant corruption.
INTERNEWS
