LAHORE - Former FBR Chairman Abdullah Yousaf has said that the economic growth of the country had slide down since 2006 owing to the inconsistent tax system lack of business-friendly policies.
While speaking during to a session at the Lahore Chamber of Commerce and Industry on Saturday, Former Chairman
Federal Bureau of Revenue (FBR) pointed out that Foreign Direct Investment (FDI) stood at $ 8.5 billion that has now come down to $500 million, depicting sliding of the economy in 2013.
He noted that Pakistan has a great growth potential that could not be tapped so far because of inconsistency in policies, distortion in tax system, cumbersome taxation procedures and absence of business-friendly policies.
LCCI office-bearers including LCCI President Farooq Iftikhar, Senior Vice President Irfan Iqbal Sheikh, Vice President Mian Abuzar Shad, former Presidents and Executive Committee members spoke on various challenges being faced by the economy.
He said that although there are a number of factors that could be blamed for this unlikely situation but frequent changes at policy level, regional instability and bureaucratic hurdles are the major reasons of this decline. He said that we would have to look into these issues to attract much needed foreign investment.
He called for increase in tax to GDP ratio to overcome the issue of fiscal deficit. He said that the phenomenal increase in country’s overall debts from Rs.6 trillion in 2008 to Rs.14 trillion in 2013 has also affected the economic activities to much extent. He said that the heavy government borrowing and currency devaluation could be blamed for huge debt that increases by more than Rs.63 billion when the dollar gains Rs.1.
He said that out of total Rs.2 trillion government revenues, 58% goes to provinces under NFC award while out of remaining 42%, Rs. 1 trillion is utilized for debt servicing, Rs.600 billion for defence and Rs.500 billion are spent on public sector enterprises including Railways, PIA, Pakistan Steel Mills and WAPDA etc.
He suggested resource mobilization and privatization of public sector enterprises to ensure economic recovery. He said that the right taxation policies coupled with good tax administration would help ensure resource mobilization.
He said that the documentation of cash economy would help resolve low tax to GDP ration phenomena and for documentation, the creation of data warehouse of potential sectors and third party information are of prime importance.
He said that Tax-to-GDP ratio of Pakistan is lowest in the world, which stands at 9.0 percent of the GDP, however, low-income countries normally have tax-to-GDP ratio between 15 percent of the GDP to 18 percent of the GDP. Middle-income countries have tax-to-GDP ratio ranging between 22 percent of the GDP to 25 percent of the GDP and tax-to-GDP ratio in high income countries is recorded at 40 percent of the GDP.
Speaking on the occasion, LCCI President Farooq Iftikhar said that the business community understands that the government should not introduce any economic policy without due consultation with the stakeholders for true implementation.
The LCCI President said that repeated issuance of SROs by the FBR is creating multiple problem for the business community therefore, in the larger interest of the economy, culture of SROs should be done away.
He said that all sectors of the economy should be taxed. He said that the agriculture having 20.1% share in GDP is contributing only 1.2% to the national taxes. On the other hand, manufacturing sector has 25.5% share in GDP and is contributing 62.2% in the national taxes. Services sector share is 54.4% in GDP while is paying only one third of its share in the national taxes.
Farooq Iftikhar said that under invoicing and smuggling are hitting the businesses hard and stringent measures are needed to weed out these evils.
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