LAHORE - The government is set to waive taxes on cash withdrawals for all registered taxpayers, officials told leading traders Thursday.
The new scheme emerged during a series of meetings between the Federal Board of Revenue and leaders of the All Pakistan Anjuman-e-Tajiran (APAT).
The move is aimed at encouraging more Pakistani businesses to register for tax and increase the government’s revenue base.
Ministers are concerned that only 3.6 million of Pakistan’s 186 million people are tax registered while only 500,000 people actually pay tax. The government aims to bring 5.7 million into its tax net.
APAT leaders told The Nation the government was to also reduce income tax ratios for wholesale dealers by 50 percent to persuade them to register. They include those in the chipboard, cement, sugar, flour, steel and leather sectors.
APAT leader Naeem Mir said the government has agreed these concessions and believes they will bring into the system those dealers who previously avoided tax registration because of high ratios.
The recommendations have now been sent to the ministry of law and will be implemented through a presidential ordinance at the end of this month.
“The committee, after consultation, will also send more sectors to reduce their income tax ratio so that all sectors could willingly pay their income tax,” he added. He said that earlier income tax ratio of wholesale dealers was more than their profit margin. “Traders used to show their sale very low to avoid income tax,” he added.
The FBR has collected Rs. 8.45 billion from banking transactions of non-filers till November. It has estimated Rs. 35 billion from WHT on banking instruments and other modes of transfer in FY16.
Former finance minister Dr. Slaman Shah said Pakistan is in a dire need of revenue reforms to boost tax-to-GDP ratio which is one of the lowest in the world. “Government will have to initiate tax reforms in consultation with the stakeholders to bring untaxed sectors into the tax net,” he added.
Pakistan’s economic growth had slowed sharply since 2009, while GDP growth averaged 3.2 percent during this period. “Significant structural and institutional reforms are needed to re-invigorate economic growth and to improve the income and welfare levels of Pakistan’s poor,” he added.
Lahore Chamber of commerce and Industry (LCCI) President Sheikh Arshad said that most of the challenges being faced by the economy were directly linked to complicated and lengthy taxation procedures.
“The government will have to make taxation system business-friendly through due consultation with the stakeholders as being done in the EU states,” he said. The Lahore Chamber believes the government will have to reduce tax rates if it wants more people to pay and bring more sectors of the economy into the tax net, he added.
In 2007 large scale manufacturing accounted for 12.2 percent of GDP, 13.7 percent of GDP and 22.2 percent of private investment. Today it accounts for 10.9 percent of GDP, 14 percent of employment and just 10.1 percent of private investment. These figures should be an eye opener for policy makers, he added.