The Pakistan Business Council (PBC) a private sector business policy think tank cum advocacy group supports an across the board implementation of the Revised Sales Tax in the Country. The PBC members which represent 30 of Pakistan’s largest business groups including multinationals are of the opinion that an across the board implementation of Sales Tax will lead to a greater documentation of the economy. This greater documentation should lead to higher tax collection and this higher tax collection it is hoped will provide the government with the fiscal space required to lower tax rates in due course.
The PBC supports the RGST Bill which has recently been laid before Parliament and calls on all organizations / individuals who want an equitable distribution of the tax burden to support the proposed legislation. The PBC, would, however request the government to address the genuine concerns of some segments of the formal economy regarding certain clauses of the Bill; especially the refund process. PBC is of the view that it is important for the FBR to ensure that a transparent and tested refund mechanism is in place to allay the concerns of the business community and also not jeopardize exports.
Pakistan’s current tax regime is flawed and inequitable, large segments of the economy are currently out of the tax net, and this is reflected in a Tax-to-GDP ratio which is one of the lowest in economies at comparable levels of development. The PBC recognizes that unless there is a significant increase in the Tax-to-GDP ratio, the economic development will not reach a level that is essential to meet the aspirations of a fast growing population. The government must be supported in its efforts to widen the tax base, however at the same time the PBC requests the government to look beyond the legislative process as there appear to be certain lacunas in the Draft Bill that could seriously hamper the smooth implementation. The success of the proposed RGST Regime will depend greatly on the government’s ability to implement the law and of course it acceptance by the stakeholders; for which a greater effort is needed from the government.