ISLAMABAD - The businessmen, in a meeting at the Islamabad Chamber of Commerce and Industry (ICCI), have called upon the government to introduce single digit sales tax rate in the federal budget, 2016-17, as the prevailing rate in Pakistan was one of the highest, having an overall unhealthy impact on the business and economic activities.
Addressing the meeting, ICCI President Atif Ikram Sheikh, Senior Vice President Sheikh Pervez Ahmed and Vice President Sheikh Abdul Waheed said the sales tax rate was 2-5 percent in Afghanistan, 2-4 percent in North Korea, 5 percent in Taiwan and Nigeria, 7 percent in Singapore and Thailand, and 8 percent in Japan; but 17 percent GST in Pakistan was a cause of concern for the business community and the general public.
They opined that higher sales tax was enhancing the cost of doing business in Pakistan, giving rise to inflation, squeezing the purchasing power of consumers and discouraging the growth of business activities. They stressed the government should bring it down to single digit in the upcoming budget, so that it could have a healthy impact on the economy.
Criticising the government’s decision to impose a fixed sales tax per litre on all petroleum products, effective from February 1, 2016, the ICCI office-bearers said it had deprived the consumers of the full benefits of big reduction in international oil prices. They said that instead of increasing the prices of petrol and diesel for the month of April 2016, the government should have rationalised GST on POL products, as it was collecting around Rs 25 per litre on petrol in a fixed sales tax of Rs 14.58, and Rs 10 as petroleum development levy, in addition to around Rs 38 per litre on high speed diesel which included Rs 29.57 as sales tax.
They said the corporate income tax in Pakistan was also the third highest in the world as confirmed by the World Bank report 2015 titled, ‘Towards a More Business Friendly Tax Regime: Key Challenges in South Asia.’ They said the global average corporate income tax rate was 24 percent, but in Pakistan it was 34%, which needed to be revised downward to facilitate the growth of corporate entities in the country.
The businessmen were of the view that reducing higher tax rates and cutting down their numbers would promote healthy tax culture, encourage people towards tax compliance, expand the tax base, improve overall tax revenue and enable the country to get rid of more foreign borrowings.