Lahore - Taxation policy is the fundamental part of the overall economic policy and planning of the country. The Institute of Chartered Accountants of Pakistan (ICAP) has always advocated for development of tax culture, documentation of the economic activities, strengthening of Tax Revenue Authority and medium to long term tax planning. Recourse to short term & ad-hoc measure has shattered the confidence of good taxpayers & coercive measures taken due to the budgetary pressures has adversely affected the economy resulting in fall in productivity, slowness in growth, increase in unemployment and higher budget deficit.

With these opening remarks, Naeem Akhtar Sheikh, ICAP Council member and Chairman Committee on Taxation explained to the representatives of leading news media, the taxation issues affecting the Pakistan’s economy. He said that most of the problems are stemming from the weakness in Federal Board of Revenue in their failure to effectively implement the fiscal laws and ensure compliance to taxation laws. There is an urgent need to upgrade the quality Human Resource of the FBR and the governance structure of the Board.

The Tax-to-GDP ratio in Pakistan has remained the lowest in the region, and is not sufficient for sustainable economic growth. The service, wholesale/retail, transport and the agriculture business sectors are still not fully documented hence their contribution to the national exchequer is extremely low.

He emphasized introducing structural reforms to get out of the economic vicious cycle. Such process could not be undertaken meaningfully in Pakistan on account of lack of democratic structure.

ICAP’s view is that the Policy Board should be entrusted with formulation of fiscal policy making as a support to legislative function. The Board should be headed by Minister of Finance and should include the Minister for Planning and the chairman of the respective committee of both houses of the Parliament, along with the Chairman FBR, Secretary Finance and members from cross section of civil society.

He explained that the primary goal of a revenue authority is to collect the taxes and duties payable in accordance with the law and to do this in such a manner that will sustain confidence in the tax system and its administration. The action of tax payers-whether due to ignorance, carelessness, recklessness, or deliberate evasion- as well as weakness in a tax administration means that failure to comply with the laws are inevitable? Therefore the tax administration should have in place strategies and structures to ensure that non-compliance with the tax law is kept to the minimum. The tax system is marred by menace of tax evasion, under reporting, tax fraud, corruption, smuggling, and under invoicing to name the few. This inequity in the system is also hitting hard to compliant tax payers, as there are no level playing fields and they have to compete with tax dodger’s\evaders, which is making their businesses unfeasible.

The honest tax payer has to bear the brunt of excesses by department and the burden of those who connives and gets away in the system. The examples of the same are stoppage of tax refunds due including VAT refunds, raising of arbitrary demands, collection of advance and undue taxes etc.