Tax reforms to help private enterprises in Pakistan

1. A s
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Pak
for
lice
High
grea
of gr
Unfo
has d
Con
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ener
cont
impr
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Paki
its se
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Econ
rates
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seem
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high
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of co
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adde
A su
(SDP
levie
and
with
We
main
survey by
licy Instit
kistani fir
m of taxe
enses and
h levels of in
ater human an
rowth in bus
fortunately, th
declined from
nventionally,
ulatory regim
rgy resources
tracts, availab
roved securit
estment activ
istan seems t
ecurity outlo
nomic growth
nomic Corrid
s allowing pr
er positive sig
ms to be slow
return of cir
istent power
ides, even if
h cost of com
preventing f
ompetition a
ring and exit
row in small
ed agricultur
urvey by Sus
PI) has indic
es in the form
surcharges. A
hholding taxe
e propo
ntained
Sustaina
ute (SDPI
rms face o
es, cess, us
surcharg
nvestment an
nd financial
siness enterpr
he number o
m 63 in 2013
cost of capit
me, an enablin
s, the ability
bility of fina
ty situation a
vity.
to have made
ook. Percepti
h rate – owin
dor (CPEC) –
rivate sector
gns. Howeve
w.
rcular debt in
r outages is a
businesses a
mpliance with
firms to grow
and higher su
ting markets
- and large-s
re and livesto
stainable Dev
cated that Pak
m of taxes, ce
Additionally
es, besides be
ose sep
d at the
able Devel
I) has ind
over 50 le
ser fees, p
ges
nd export and
resources are
rises in an ec
f new investm
3 to 35 in 20
tal, trade ope
ng infrastruc
of the state t
ancial interm
are seen as ke
e some progr
ons regardin
ng primarily
– and low le
credit to inc
er, progress o
n the energy
an example in
adjust to infra
h tax and regu
w. Weak enfo
unk costs face
is also not a
scale manufa
ock sectors.
velopment Po
kistani firms
ess, user fees
y businesses f
eing charged
paratio
e Mini
lopment
dicated th
evies in th
permit,
d employmen
e among key
conomy.
ments in Pak
16.
enness, tax an
cture includin
to enforce
ediation, and
ey determina
ress on impro
ng an improv
to China Pak
vels of intere
rease have b
on other indi
sector and
n this regard
astructure de
ulatory regim
orcement of r
ed by busine
allowing new
acturing and v
olicy Institut
s face over 50
s, permit, lic
face several
d tax liability
Ho
n of ta
stry of
hat
he
nt of
y signs
kistan
nd
ng
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ants of
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ved
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est
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distorted man
taxes, further
federal, prov
its different m
submitting p
transactions
transferred to
of welfare. T
regime is a k
flourishing.
Another imp
economic eff
changes in de
increased loc
import bill if
suffers a high
tax-related ex
So what may
towards a mo
positive sign
Firstly, there
of direct taxe
Secondly, the
forth by its T
recently mad
Goods and S
regime. The
compliance w
multiple and
of federal ex
taxes on trad
Thirdly, the f
in tax contrib
This is neede
what it claim
from agricult
tax net.
he b
cy and
nce, wh
nner. This in
r taxes, and s
vincial and lo
modus opera
ayments and
costs of busi
o consumers,
The study sug
key reason pr
act of higher
ficiency. A ta
emand and s
cal prices of
f the same go
her cost as b
xpense.
y be done in t
ore fair and j
nal to existing
e should be a
es.
e governmen
Tax Reform C
de changes to
Services Tax
TRC propos
with general
double taxat
cise duty and
de.
forthcoming
bution by dif
ed to alleviat
ms is an unjus
ture and serv
budg
admin
hile tax
ncludes advan
super taxes. T
ocal governm
andi for filing
d auditing the
inesses some
, leading to h
ggests that co
reventing sta
r number of t
ax on goods,
supply. This
a good in sh
ood is import
oth buyers an
the forthcom
ust tax regim
g and new en
reduction in
nt should rev
Commission
o India’s Cen
law to reform
sals seek redu
sales tax, so
tion across p
d a more tran
budget shou
fferent sector
te the manufa
stified burden
vices sector s
get c
nistrati
admin
nce taxes, tu
Taxes are pa
ment levels, e
g, assessing,
em. This incr
e of which ar
higher price a
omplexity in
rt-up firms fr
taxes is loss
, for example
in turn impli
ortage and al
ted. Thus soc
nd sellers ad
ming budget t
me which pro
nterprises?
n number, rat
view proposa
(TRC) and a
ntral and Inte
m its indirect
uction in cos
olution to the
provinces, ph
nsparent stru
uld bring som
rs of the econ
acturing sect
n of taxes as
still remain o
April 2
an s
on fun
nistrati
urnover
aid at
each with
reases
re
and loss
n tax
from
of
e, causes
ies
lso higher
ciety
djust with
to move
ovides a
te and type
als put
also study
egrated
t taxes’
st of
e issue of
hasing out
ucture for
me balance
nomy.
tor from
s income
out of the
23, 2017
ave
ctions.
ion fun
A careful
example,
direct tax
inputs rem
In the cas
medium e
exemptio
a select f
for CPEC
In the ser
higher th
services f
sectors is
categorie
Fourth, th
requires a
prevents
activity.
Tax admi
provincia
least alon
and if the
of influen
Furtherm
can help
officials,
And, asse
geograph
other form
We also p
administr
policy un
Finance,
Federal B
bodies. T
through s
Ombudsm
priv
. Ideall
nction m
l review of ta
, keeping a la
xes provides
main subject
se of industry
enterprises g
ons and prefe
few. The exem
C is a case in
rvice sector,
han those in p
from Pakista
s exempt from
es of exports
he administr
an overhaul.
private secto
inistration ca
al revenue au
ng the lines a
e recruitment
nce of any go
more, informa
reduce the in
leading to a
essments tha
hical informa
ms of audit.
propose sepa
ration functio
nit should be
while tax ad
Board of Rev
The administr
strengthening
man offices.
vate
ly, a de
may be
axation on in
arge part of a
little relief to
ted to GST a
y, a level pla
gets distorted
erences are p
mptions prov
n point.
GST rates on
peer economi
an. While exp
m taxes, exp
require a bal
ation of reve
Fear of intru
or entities fro
an be improv
uthorities are
allowed to th
t process at t
overnment m
ation technol
nterface betw
reduction in
at use scientif
ation systems
aration of tax
ons. Ideally,
maintained
dministration
venue (FBR)
rative reform
g of federal a
ente
edicate
e left to
nputs is also
agriculture ex
o farmers if a
and customs d
aying field fo
d if wide rang
provided in th
vided to inpu
n services in
ies. This affe
port of goods
ort of service
lanced treatm
enue authorit
usion by tax
om declaring
ved if federal
e allowed ful
he State Bank
these authori
ministry or de
logy-enabled
ween tax pay
n incidence o
fic tools such
s can help fo
x policy and
a dedicated
at the Minist
n function ma
and provinc
ms can be exp
and provinci
erpr
d natio
o FBR
needed. For
xempt from
agriculture
duty.
or small and
ging
he tax code to
uts imported
n Pakistan are
ects export o
s in several
es is not. Bot
ment.
ties also
authorities
g all of their
l and
l autonomy a
k of Pakistan
ties is made
epartment.
d processes
ers and
of corruption
h as the
rensic and
national tax
try of
ay be left to
cial revenue
pedited
al tax
rise
onal ta
and pr
o
e
of
th
at
n;
.
Fifth,
provi
Enter
impo
regul
and ta
event
lower
Final
none
forwa
to the
of ack
Such
hearte
publi
Feder
Indus
Coun
steeri
Comm
FBR.
the pr
As th
forthc
consi
lower
of Pa
enterp
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detail
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budge
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knowledgme
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ncil (EAC) at
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private-enter
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enue b
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entre for Inte
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vinces have d
are applicabl
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rtunate prece
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ed their pre-b
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he Economic
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s and Produc
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next fiscal ye
most appropri
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tted to the
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l tax rules an
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rnment whol
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ax committe
merce and
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at Ministries
ction and the
an EAC to ad
ear is
iate time to
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