KARACHI (Staff Report) – President American Business Council has said that in order to spur investment the government needs to implement a transparent and equitable taxation structure, investors, existing and new alike, seek predictability and transparency.
Arshad Saeed Hussain said in a statement that government is looking for ways to spur growth and we are disappointed that government hasn’t extended benefits under Section 65 of the Income Tax Ordinance.
“Imposing one-off taxes such as ‘super tax’ can potentially create cash management issues for corporations as well as effectively increasing the tax burden on existing taxpayers. Moreover listed companies that fail to distribute dividends within 6 months of the end of their income year, such that reserves are in excess of 100% of their paid-up capital, will be taxed at a rate of 10% on the entire amount of undistributed reserves. This will result in double taxation as these reserves arise out of income that has already been taxed.
Moreover the distribution of reserves in the form of dividends will severely impact growth as companies will not have the funds available to invest in expansion projects, ” commented Arshad Saeed Husain.
The 1% reduction in corporate tax rates is in line with plans to bring rates down to 30% by FY18. With corporate taxes in Pakistan currently at 32% (35% for banks), they remain high when compared to the rest of the world.
The cost of non-tax compliance is set to increase from the measures announced in the federal budget but that much more needs to be done to broaden the overall tax net and increase the Tax to GDP ratio. The government needs to take sterner action against non-filers as token penalties will not sufficiently deter big tax evaders, stated Husain.
The American Business Council of Pakistan (ABC), while acknowledging that the government has taken steps to address structural constraints to growth by providing incentives such as subsidies and tax holidays to investment in the power sector and incentives for manufacturers to boost exports, expressed concerns over the fact that that suggestions to simplify the taxation structure have not been considered by decision making authorities.
