ajpirzada
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ISLAMABAD - Showing concerns over the lowest tax to GDP ratio, the new growth strategy titled Pakistan: New Growth Framework devised by Planning Commission observed countrys tax gap has exceeded Rs 600 billion as a result of tax exemptions given to the agriculture and services sectors.
Pakistans abysmally low tax-to-GDP ratio amongst other reasons is also attributed to the administrative gaps. Under invoicing, smuggling, narrow tax base, low compliance, a large undocumented economy and weak audit and enforcement are major impediments in this regard. Currently only 2.75m people are NTN holders in Pakistan which is around 1.6pc of total population.
According to the strategy, subsides find untargeted in the budget and most of them are because of political pressures and not poverty-related arguments. The list of entities receiving mostly untargeted subsidies includes the Water and Power Development Authority (WAPDA), Karachi Electric Supply Company, Trading Corporation of Pakistan, Utility Stores Corporation and PASSCO. Besides these, the government also subsidies oil refining, wheat and sugar retail, spinning sector mark-up, and research and development for the textile and the motorcycle industries.
Meanwhile, some of the Public Sector Enterprises are not viable for privatization in their current state needs immediate restructuring, as loss-making entities include PIA, Pakistan Agricultural Storage and Services Corporation, Pakistan Electric Power Company, Pakistan Steel, and Pakistan Railways. Moreover, the operations of PSEs such as TCP and USC have been subsidized with no cut-off date. As part of the effort to reform the PSEs, the strategy argues that transition CEOs and powerful Boards of Directors comprising all the stakeholders should be appointed in all the entities before entering the process of restructuring and later privatisation.
The ongoing war-on-terror and related security challenges has impacted the socio-economy of Pakistan in multifarious ways. These include a declining GDP, reduction in foreign investment, loss of employment, incomes and exports, damage to physical infrastructure, diversion of resources towards military operations, cutbacks in Public Sector Development Programme, capital and human flight, exchange rate depreciation and inflation. According to the Economic Survey 2010 the estimated direct and indirect loss to the economy since 2002 due to the war-on-terror is around $43 billion.
Pakistans population until recently was growing at 3 per cent annually and is now growing at an annual rate of about 2 per cent. As a result of the previous rapid population growth, our labour force is expected to grow at about 3.2 per cent annually over the coming years. To absorb this addition to the labour force, we need our GDP to grow at a rate of around 7 per cent annually and this growth must be sustained in the coming years.
On land reforms issue, the growth strategy states the oral transfer of land should be disallowed. This entails an amendment to the Transfer of Property Act 1882. Under this act, the oral transfer of land is permitted in Pakistan creating confusion about the ownership of the lands and creates litigations, which take years to resolve in the courts. Transferring property through oral gifts should be disallowed.
There is need to repeal the Punjab Pre-Emption Act 1991, disallowing the neighbours to a property the right of first refusal. Time has come for centralising of land title records by consolidating the steps taken when purchasing land (i.e. visiting only one agency instead of several bodies including SECP, Land Registrar, Revenue Department, Excise Department and local Development Authority).
Computerisation of the land records should be in place, such as initiated in Punjab under the Punjab Land Records and Information Management Systems (LRIMS) project. There is need of setting up a Multi-Listing Service (MLS) to have a computerised record of available land for sale.
There is need of auctioning government held land and transferring government owned land (on 99 year lease) to full freehold.
On taxation side, there is need to make amendments to the Income Tax Ordinance 2001 and Sales Tax Act 1990 to limit the discretionary power of the Federal Board of Revenue and improve administration, auditing system and tax refunds system, simplifying the tax system and tax administration by creating one-window cells for tax registrations at the sub-national level to cater to all taxes (federal, provincial and local), unifying NTN and GST registration to one Tax Registration Number through amendments to the Income Tax Ordinance 2001 and the General Sales Tax Act 1990, improving technology and e-governance strategies to facilitate tax registration and tax filing system at the FBR and modifying tax laws to include deadlines for speedy disposal of pending and new court cases.
There is need for establishment of commercial courts that can provide a specialised environment for the firms to deal with their problems.
Tax gap exceeds Rs600b | Pakistan | News | Newspaper | Daily | English | Online
Pakistans abysmally low tax-to-GDP ratio amongst other reasons is also attributed to the administrative gaps. Under invoicing, smuggling, narrow tax base, low compliance, a large undocumented economy and weak audit and enforcement are major impediments in this regard. Currently only 2.75m people are NTN holders in Pakistan which is around 1.6pc of total population.
According to the strategy, subsides find untargeted in the budget and most of them are because of political pressures and not poverty-related arguments. The list of entities receiving mostly untargeted subsidies includes the Water and Power Development Authority (WAPDA), Karachi Electric Supply Company, Trading Corporation of Pakistan, Utility Stores Corporation and PASSCO. Besides these, the government also subsidies oil refining, wheat and sugar retail, spinning sector mark-up, and research and development for the textile and the motorcycle industries.
Meanwhile, some of the Public Sector Enterprises are not viable for privatization in their current state needs immediate restructuring, as loss-making entities include PIA, Pakistan Agricultural Storage and Services Corporation, Pakistan Electric Power Company, Pakistan Steel, and Pakistan Railways. Moreover, the operations of PSEs such as TCP and USC have been subsidized with no cut-off date. As part of the effort to reform the PSEs, the strategy argues that transition CEOs and powerful Boards of Directors comprising all the stakeholders should be appointed in all the entities before entering the process of restructuring and later privatisation.
The ongoing war-on-terror and related security challenges has impacted the socio-economy of Pakistan in multifarious ways. These include a declining GDP, reduction in foreign investment, loss of employment, incomes and exports, damage to physical infrastructure, diversion of resources towards military operations, cutbacks in Public Sector Development Programme, capital and human flight, exchange rate depreciation and inflation. According to the Economic Survey 2010 the estimated direct and indirect loss to the economy since 2002 due to the war-on-terror is around $43 billion.
Pakistans population until recently was growing at 3 per cent annually and is now growing at an annual rate of about 2 per cent. As a result of the previous rapid population growth, our labour force is expected to grow at about 3.2 per cent annually over the coming years. To absorb this addition to the labour force, we need our GDP to grow at a rate of around 7 per cent annually and this growth must be sustained in the coming years.
On land reforms issue, the growth strategy states the oral transfer of land should be disallowed. This entails an amendment to the Transfer of Property Act 1882. Under this act, the oral transfer of land is permitted in Pakistan creating confusion about the ownership of the lands and creates litigations, which take years to resolve in the courts. Transferring property through oral gifts should be disallowed.
There is need to repeal the Punjab Pre-Emption Act 1991, disallowing the neighbours to a property the right of first refusal. Time has come for centralising of land title records by consolidating the steps taken when purchasing land (i.e. visiting only one agency instead of several bodies including SECP, Land Registrar, Revenue Department, Excise Department and local Development Authority).
Computerisation of the land records should be in place, such as initiated in Punjab under the Punjab Land Records and Information Management Systems (LRIMS) project. There is need of setting up a Multi-Listing Service (MLS) to have a computerised record of available land for sale.
There is need of auctioning government held land and transferring government owned land (on 99 year lease) to full freehold.
On taxation side, there is need to make amendments to the Income Tax Ordinance 2001 and Sales Tax Act 1990 to limit the discretionary power of the Federal Board of Revenue and improve administration, auditing system and tax refunds system, simplifying the tax system and tax administration by creating one-window cells for tax registrations at the sub-national level to cater to all taxes (federal, provincial and local), unifying NTN and GST registration to one Tax Registration Number through amendments to the Income Tax Ordinance 2001 and the General Sales Tax Act 1990, improving technology and e-governance strategies to facilitate tax registration and tax filing system at the FBR and modifying tax laws to include deadlines for speedy disposal of pending and new court cases.
There is need for establishment of commercial courts that can provide a specialised environment for the firms to deal with their problems.
Tax gap exceeds Rs600b | Pakistan | News | Newspaper | Daily | English | Online
