ISLAMABAD: Abdul Rauf Alam, the president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) disclosed that Pakistan is the third highest country in the world in corporate taxes.
In an exclusive talk with Customs Today, he said that about 52 types of local, provincial and federal level taxes are being paid by the corporate sector which is a major reason in the way of doing business in Pakistan.
He said in 2015, World Bank in its report mentioned that Pakistan has a disturbingly high tax rate for businesses. The tax rate is stated as unusually high for a nation from a developing country. A small number of taxpayers is always under pressure of higher tax rate due to narrow-based tax net.
While comparing the ratio of corporate taxes in 2015 with other countries, he stated that in Pakistan it is 33 percent whereas in Bangladesh, it is 27 percent, Sri Lanka 28 percent, Malaysia 25 percent and the average corporate taxes in Asia is 23 percent whereas the global average is 24 percent. The situation is similar in indirect taxes and GST.
Responding to a question Rauf Alam said that FPCCI has been emphasizing on higher share of direct taxes and shifting from indirect taxes to provide relief to a common man. The system of taxation in Pakistan is regressive in its nature as it shifts the burden of taxes to the lower income group. The FPCCI’s stance is clear that who earns more should pay more taxes regardless the source of earnings. Tax-to-GDP ratio is lower even though the rate of taxes in the country are very much higher which shows the unequal burden of taxes.
Rauf Alam said that Pakistan has become an attractive land for foreign investments but higher rate of corporate taxes may discourage the investment due to lesser return over investment in coming days. Government must rationalize the corporate taxes within the global average rate. Government and FPCCI both are on same page to rectify such dichotomy and anomalies in tax system.
Federal Finance Minister Ishaq Dar has realized the problems in tax system and has ensured that government and FPCCI would streamline the fiscal policy and tax system for the economic progress and prosperity of the country.