Karachi, May 11, 2015 (PPI-OT): Acting President of the Karachi Chamber of Commerce and Industry (KCCI), Muhammad Ibrahim Kasumbi has urged the government to completely review the entire tax regime and enforcement structure while a clear strategy must be devised in consultation with the business community in order to put an end to the massive discretionary power of the FBR.
In a statement issued, Ibrahim Kasumbi pointed out that massive discretionary powers granted to various departments of the Board during the past couple of years were only focused on further squeezing the existing taxpayers while no effective strategy or plan of action was on ground to deal with tax evaders who continue to enjoy all the luxuries of life and stay outside the tax net.
“It is unfortunate that less than one percent of the total population pays taxes and majority of the wealthy population stays outside the tax net due to lack of effective mechanism along with massive corruption”, he added.
Highlighting some of KCCI Budget proposals 2015-16 extended to the federal government for consideration, Ibrahim Kasumbi pointed out that Pakistan cannot afford to continue with the current narrow tax base due to outdated tax regime, discretionary powers and disproportionate hold of bureaucracy on formulation of economic and tax policies.
He was of the opinion that the existing direct and indirect taxes have created distortions in the economy while the FBR has not been able to broaden the tax base and continues to rely heavily on indirect and withholding taxes. Stressing the need to bring down GST to single digit, Acting President KCCI noted that despite high rate of General Sales Tax (GST) at 17 per cent and additional three per cent on commercial imports, the net collection of GST after refunds and adjustments was hardly 3.75 to 4.25 percent.
Ibrahim Kasumbi also underscored the need to separate policy making process / tax legislation from enforcement and administration, curtailing discretionary powers, and minimizing personal contact between the tax payer and IR officers. The current tax regime discourages new taxpayers to register, as there are ample opportunities to earn a decent profit from investing in the undocumented economy, he opined.
Ibrahim Kasumbi said that an unconventional approach and some difficult decisions must be taken to ensure that burden of taxes is evenly distributed and does not entirely burden the middle and lower income sections of society. At the same time it should enhance the revenue and broaden the tax base.
He further noted that the size of industry in cities and towns other than Karachi were four times greater, but the tax collection was less than one third of the total collection. Tax collection and compliance was limited mostly to urban centers, while rural economy hardly contributes anything, despite having at least 26 percent share in GDP.
Referring to FBR’s power to call for information on bank accounts, Ibrahim Kasumbi suggested that such access may only be granted by competent courts of law in exceptional circumstances and cases of substantial evasion where adequate evidence is available. “It will help restore confidence of investors and create a business-friendly environment to promote growth”, he added.
Acting President further advised that multiple audits of taxpayers must be stopped because it has only created harassment and did not yield any significant increase in collection. Rather the taxpayers are being squeezed by field formations and new taxpayers are prevented from coming into the tax net.
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