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Haroon for enhancing tax-to-GDP ratio from 11% to 18%

Haroon for enhancing tax-to-GDP ratio from 11% to 18%

KARACHI: There is need to enhance the tax-to-GDP ratio from the present 11 percent to 17-18 percent, said Minister for State and Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan.

Speaking to businessmen at the Karachi Chamber of Commerce and Industry (KCCI), he said that with the addition of six percent in the tax-to-GDP ratio, the country’s budget deficit will not only vanish, but the country would have surplus budget for development expenditures.

The state minister alleged that the local residents have misused tax immunity given on foreign remittances. He shared the facts about the weaknesses in the taxation system and tax culture and said that the Federal Board of Revenue (FBR) had unearthed Rs3 billion transactions by a school against which the education institute had not declared even Rs3 million.

“The directors of the school receive huge pays and perks and transferring [the money] in the country through availing of the immunity,” he added.

Under Section 111(4) of the Income Tax Ordinance, 2001, there is immunity of questioning the source on inflows of remittances received through normal banking channels in Pakistan.

Khan said there is a need to change culture in tax collecting machinery.

He said a computerised system of a hospital was investigated, which had concealed Rs5 billion, whereas the doctors were paid millions of rupees as consultancy charges.

Further explaining the disappointing situation in the payment of taxes, especially indirect taxes, he said that during the last fiscal year, the total sales tax (domestic) collection was Rs500 billion. “Only 329 companies paid 95 percent of the total tax collected under the head of sales tax (domestic),” he said, adding that of the 329 units, only 10 units paid half of the 95 percent tax.

The state minister said to broaden the tax base, the FBR had started issuing notices to tax evaders. “Without carrot and stick policy no taxation system can be improved,” he added.

Talking about the Voluntary Tax Compliance Scheme (VTCS), he said, every facility extended in the scheme was demanded by the representatives of the business community. So far, under this scheme, an amount of Rs32 billion has been declared and the FBR received Rs320 million as revenue, he added.

He expressed surprise that despite addressing the objections of traders in the scheme, the business community is demanding more incentives. “In fact the traders do not want to become part of the tax net,” he added.

Haroon said that the FBR was clearly instructed not to arrest or lodge an FIR against businessmen in case of concealment of establishment. However, he said that the FBR had been directed to recover losses incurred to the national exchequer.

Responding to the below potential revenue collection of the tax machinery, he admitted that there were problems with the lower cadre officials, but also pointed out evasion by the taxpayers. On the issuance of refunds, he said that 90 percent refund claims up to Rs5 million had already been paid and the remaining would be disbursed by March 15.

He also said that large size refund claims were discussed at the ministry level to address through issuance of bonds. He; however, said that he had suggested to bring this idea through the Finance Bill for the fiscal year 2016/17.

Earlier, KCCI President Younus Bashir said that in order to meet the budget deficit the country need to improve tax collection. The policies introduced by the previous governments had resulted in reduction in the tax base, he said.

Bashir said that at the time of launching VTCS, it was estimated that around one million new taxpayers would be added to the system, but so far the number was in a few thousands. The KCCI president said that the government should revisit its policies to increase the tax net.