PEW for balanced tax regime to facilitate industrial sector

ISLAMABAD: The Pakistan Economy Watch (PEW) on Tuesday said that the country’s industrial sector was going down due to the burden of heavy tax, which was obstructing national development, revenue and employment.

According to the watchdog, government continues to announce packages for the industry but avoids balancing the tax regime, which was tilted towards non-productive sectors.

PEW President Dr Murtaza Mughal said that the industrial sector’s share in the country’s GDP was 17 per cent yet it was made to pay taxes up to 73pc, while the combined share of trade and transport in the GDP was also 17pc, however, it was paying only 1.2pc tax.

“Agriculture’s share to the GDP was 21pc but the tax collected from the sector was mere one percent due to political reasons,” he said, adding that stock market capitalisation was almost 28 to 30pc of the GDP but the sector gives a mere 0.03pc which was unjustified.

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Dr Mughal said that the government can easily collect up to Rs500 billion tax from wealthy brokers but “it is overlooked since long for obvious reasons”.

The volume of trade activity in the country was double than exports but the authorities were avoiding to bring this sector into the tax net knowing that traders also sell undocumented and smuggled items.

Due to rampant smuggling and under-invoicing, the local industry was compelled to show reduced production to remain in the business, while professionals like chartered accountants, lawyers and doctors etc., were enjoying undue tax relaxations, he maintained.

“Other countries in the region take strong exception of smuggling and traders selling smuggled goods are taken to task besides, destroying smuggled goods. But this has never happened in Pakistan the way it should,” he concluded.

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  1. Turnover tax is the biggest burden which the government is not seeing it’s the elephant in the room . In many industries like steel re rolling it constitutes a tax rate of between 75 to 80% . as raw materials constitute 75/80% of the selling price . If a CO makes a loss they still have to pay tax where else does such a system exist . FBR goes only after the documented sector and gives a free ride to unorganised sector as its to lazy to go after them.


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