'Fair taxation system imperative to make Pakistan an equitable society'

• Shabbar Zaidi says policies of previous govts made Pakistan a trading state instead of a semi-manufacturing state

ISLAMABAD: Federal Board of Revenue (FBR) Chairman Shabbar Zaidi said on Friday that the government remains focused on the expansion of the tax base, as it is necessary for the documentation of the economy.

"Taxation is the only way forward for equitable distribution of wealth, as we cannot have a stabilized and equitable society unless we have a fair taxation system," he said during a policy symposium on "Pakistan's Economy and IMF Programme: Challenges and Opportunities" organised by the Sustainable Development Policy Institute (SDPI).

He said the incumbent government and the International Monitory Fund are on the same page and there is no disagreement on the measures proposed by the IMF, especially with regard to taxation.

Zaidi said the government would not bow down to the pressure, protests and lame excuses of businesses and industries. "We are trying to make Pakistan good for everyone and not for (any) particular sector."

He lambasted the previous taxation regimes for lack of prudent tax policies. "The policies of the previous governments made Pakistan a trading state instead of a semi-manufacturing state. They made the country import everything, from mineral water to foods items, and never worked-out on import substitution," he added.

While raising concerns over the open transit trade agreement with Afghanistan, he said the agreement is being exploited and abused by the smugglers and that it is negatively impacting the local industry.

"Pakistan needs to review this agreement and should take stringent measures to control the illicit trade on Pak-Afghan border," he maintained.

Shabbar Zaidi said there are around 100,000 companies registered with the government, but only 60,000 file their returns. “This highlights the level of tax compliance in Pakistan.”

The FBR chairman claimed that the measures taken in the current federal budget would fundamentally change the course of Pakistan's history.

“The government is taking appropriate measures to redress institutional corruption through automation of the taxation system,” he added.

Speaking on the occasion, former finance minister Dr Shamshad Akhtar said stabilization of the economy is crucial for the country’s growth.

She said the country and its people would have to endure this tough economic period in order to see the light of the day, as there is “no gain without pain”.

“After the introduction of key structural reforms across the board, the economy will come out of the prevalent crisis,” she added.

Dr Shamshad Akhtar noted that major economic challenge of the country included high consumption, low production and low savings and investments, adding that the gap is widening between saving and investments, which is pushing the country to seek foreign assistance.

While talking on IMF programme, she said IMF polices are usually dynamic which may help Pakistan address fiscal imbalances.

IMF Resident Representative for Pakistan Maria Teresa Daban Sanchez said the $6 billion Extended Fund Facility (EFF) for Pakistan aims to support the economic reform programme of the country.

She said the programme focused on decisive fiscal consolidation to reduce public debt and build resilience, besides expanding social spending.

The programme will help Pakistan reduce economic vulnerabilities and generate sustainable and balanced growth, she added.

Moreover, she said the programme is expected to unlock broader support from multilateral and bilateral creditors in excess of $38 billion, which is crucial for Pakistan to meet its large financing needs in the coming years.

SDPI Executive Director Dr Abid Qaiyum Suleri said at the very beginning, there was lack ownership from the government on the IMF programme, which made the programme controversial.

He said the letter of intent of the current government to IMF focused on expanding social safety nets to cushion the impact of the needed stabilization policies on the poor, which is a positive step.

However, the government needed to strengthen its social protection programmes and should focus on direct taxation to help reduce the burden on the vulnerable segment of the society, he added.