The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to implement taxation reforms and simplify the taxation system in the upcoming budget for the fiscal year 2023-2024.
Irfan Iqbal Sheikh, President of FPCCI, emphasized the need for international best practices, simplification of the taxation system, and expanding the tax base to achieve a business-friendly and pro-growth budget that can stimulate the economy.
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Sheikh highlighted that Pakistan’s current taxation system contributes less than 10 percent of the GDP to the national exchequer, indicating an imbalance, lack of broad-based coverage, and complexity. Heavy reliance on indirect taxes and surcharges has been detrimental to the economy, and the revenue generated is insufficient to cover debt servicing, defense, social welfare, and public-sector development programs.
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The FPCCI chief pointed out that taxpayers often lack awareness of their obligations, and major changes in taxation policies are not accompanied by the necessary adjustments in the administrative framework. The Federal Board of Revenue (FBR) faces challenges in terms of organizational structure, business processes, business-friendly facilities, institutional budget, and a skilled workforce. Additionally, the FBR and its staff lack adequate knowledge and technological advancements required for efficient tax administration and digitalization.
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To guide the government in formulating taxation policies, Irfan Iqbal Sheikh outlined several principles: supporting businesses to tap into untapped international markets, attracting foreign direct investment (FDI) for sustained economic growth, maintaining macroeconomic stability, streamlining tax laws and regulations, developing an efficient tax administration, and aligning taxation objectives with industrial, export, and fiscal goals.
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Zakaria Usman, Convener of FPCCI’s Budget Advisory Council, highlighted that although revenue collection has increased from PKR 3,112 billion in FY16 to PKR 6,148 billion in FY21, the tax-to-GDP ratio has remained stagnant around 10 percent during the same period. Usman stressed that substantial economic growth is challenging to achieve with such a low tax-to-GDP ratio.
The FPCCI’s proposals aim to create a taxation system that fosters economic activities, encourages investment, and enhances revenue generation. Simplifying the taxation system, expanding the tax base, and aligning taxation policies with economic objectives are considered crucial steps in realizing a robust and sustainable economy in Pakistan.
