The Economic Advisor Abdul Hafeez Sheikh spoke it loud and clear that FBR’s tax proposals for the coming year is not aligned with Government vision and it needs to be simplified and easier to boost up business and reduce the cost of compliance.
The said message was given to the Ministry of Finance and Federal Board of Revenue (FBR) in the formal meeting on budget exercise for the next fiscal year. The government intends to present the federal budget in the first week of June, 2020.
“Budget should be a simple policy document with no ambiguities and complications”, Hafeez said
It was reported that Dr. Sheikh expressed his displeasure over the said issue and asked the officials the reason for including a large number of taxes that would yield very little urging them to reduce the number of taxes to four or five with high yield while removing the others from the list. He guided them to make the budget a simple policy document free of any complications and complexities.
Resources claimed that Hafeez Sheikh also rejected the proposal of slightly increasing some of the taxes and announced that the country was undergoing a serious economic downturn and this was not the appropriate time to upsurge the burden on the Pakistani citizens in the form of increased taxes. He guided them to align the budget document with the vision and chemistry of the government by simplifying the issues. Mentioning the taxes like custom duty, additional custom duty and regulatory duty Sheikh asked the officials how would they justify these so many taxes. The prominent participants of the meeting included Abdul Razzak Dawood (Commerce Advisor), Dr. Ishrat Hussain (Reforms Advisor) and Hammad Azhar (Minister for industries).
The crux of the meeting was to reduce the number of taxes while enhancing their coverage and quality
The discussion on the issues of tax refunds (5-6 years) and smuggling was also made that had resulted in the flood of contraband, duplicate and substandard products in the markets making it difficult to recover collections from the bottlers, cigarette suppliers and various other products sellers and distributors. He urged to protect the registered and document businesses while curbing the smuggling and emphasized to reflect the themes in the coming budget.
He also directed to develop a table of around 40 taxes of different levels and present it in the next meeting w.r.t
- Cost of compliance
- Sensitivity analysis
Hafeez also demanded the sector studies of these taxes to be attached as a supporting document so as to avoid multiplicity of taxes and reach a decision as how many of them were mandatory and unavoidable.
It was also discussed that the tax authorities should formulate a comprehensive working structure (to justify a tax measure or to overthrow a reform process) through a combination of revenue yield, its impact on the economy and tax payers’ compliance costs. Imposition of unnecessary taxes in the name of IMF was not justifiable at any cost.
Talking about the revenue targets, Hafeez Sheikh told that the FBR would have to recover almost 30 percent higher amount (Rs. 5.1 trillion) for the fiscal year 2020 that had earlier been estimated to be Rs. 3.9 trillion.
For Ministry of Commerce that urged to reduce the duties from current 11 percent to 1.5 percent, Hafeez directed to make it at zero so as to remove another hurdle for the businesses and meet again with revised plan within 7 days. The basic theme of the meeting was to reduce the number of taxes while improving their quality and coverage.