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Multiple Sales Tax Rates be Reduced to Single Digit to Curb Parallel Economy

Islamabad:Former President FPCCI Tariq Sayeed has said that GDP growth should be increased at least 5% relief and facilitation should be provided to the common man through the taxation system,he said while apprising Dr. Abdul Hafeez Shaikh, Federal Minister for Finance about the aims and objectives of FPCCI’s Proposals for the Federal Budget 2012-13.
He said that investment should be attracted in the manufacturing sector through a Tax Amnesty Scheme and tax net should be broadened by identifying new taxpayers. The Finance Minister was accompanied by Mr. Mumtaz Haider Rizvi, Chairman FBR and other high ranking officers of the Federal Board of Revenue during his visit to FPCCI.

Highlighting the salient features of the proposals Sayeeed urged that multiple rates of sales tax be reduced to a single uniform rate of 9% to curb smuggling and reducing the size of the parallel economy. This will eliminate fake and flying invoicing and other mal-practices and the Government will generate more revenue, on one hand and give relief to common man on the hand, as indirect taxes are regressive in nature.

The meeting was chaired by Sheikh Shakil Ahmed Dhingra, Acting President-FPCCI. Also present as speakers at the event were former Presidents-FPCCI, Mr. S.M. Muneer and Mr. Iftikhar Ali Malik; and FPCCI Vice Presidents Mirza Abdur Rehman, Mr, Zubair Ali, Mr. Iqbal Dawood Pakwalla. The Secretary Finance, Mr. Abdul Wajid Rana, Mian Zahid Hussian, Mr. Zakaria Usman, Mr. Mansha Churra, Mr. Khalid Tawab, Shaikh Manzar Aalam, and Mr. Zubair Tufail also spoke on the occasion. The meeting was widely attended by businessmen throughout Pakistan.

Sayeed started his presentation by giving all participants a review on the state of Pakistan’s economy, which has been performing far behind regional countries. He mentioned some key recommendations that the Government should consider in order to achieve the above objectives. He suggested that there must be a focus on social development as the ranking of the country has slipped from 146 to 148 in the Human Development Index (the lowest in South Asia). The Government must devise proactive and long-term strategies instead of short-term policies in the following areas, namely: Concerted efforts of the Government are needed to facilitate economic diversification, and reduce the direct role of the public sector. In this regard, export-led diversification must be achieved through the state’s role in making the private sector dominant in the economy. Documentation of the informal sector will lead to an increase in the tax-net. Implementation of the rule of law is crucial in all areas. The energy shortfall which has reached 6500MW must be removed on a war footing. The allocation of the Public Sector Development Programme (PSDP) should not be utilized for non-development purposes, as has happened in the past. Smuggling should be made unattractive by reducing the rate of duty on smuggle prone items. The institution of the Alternative Dispute Resolution Committees (ADRC) must be revitalized for seeking out-of-court settlement to tax disputes. Finally, the working of the Sub-Committees of the Business Persons Council constituted by the Finance Minister must be made more efficient.

While agreeing with many of the concerns raised by Mr. Tariq Sayeed and other participants, Dr. Shaikh said that those who are already paying taxes would not have to bear any additional taxes, and would get some relief in the Budget for 2012-13. He said that the upcoming Budget would be investment, employment, pro-poor and growth-oriented. He conceded that there was no bigger stakeholder in Pakistan’s economy than the private sector, which must be supported by the Government. He assured the business community that industry-specific issues would be addressed by FBR in the forthcoming Budget.

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