The Pakistan Business Council (PBC) expressed regret that the Super Tax penalized successful large businesses while signaling the benefits of remaining small and under the radar, thereby encouraging fragmentation.
According to the PBC’s recommendations on tax reforms and restructuring the FBR, significant changes in the structure, talent, and technology of the Federal Board of Revenue (FBR) as well as fiscal policy are required to make taxation equitable, broad-based, and effective in raising the country’s tax to GDP ratio.
According to the key reforms, all income above a certain threshold, regardless of source, should be taxed. Fiscal policymaking and tax collection should be kept separate.
To inspire taxpayer confidence, an audit that operates independently of the FBR and is preferably composed of the leading accounting firms should be established.
Other reforms included completely overhauling FBR’s human resources and focusing more on training and technology deployment.
The FBR should be given temporary relief from chasing unrealistic tax collection targets until the restructuring is completed. To meet revenue targets, fiscal policy is inconsistent and unpredictable, prone to knee-jerk changes and taxing the already-taxed.
PBC, on the other hand, stated that the use of SROs to exempt or provide indefinite relief to specific sectors/taxpayers is prohibited.
“Front-loaded and unrealistic tax collection targets for an inadequately resourced FBR and provincial revenue authorities force them to chase existing taxpayers and adopt harassment rather than objective assessment as the means to meet these.
Until the FBR and the provincial revenue authorities are radically restructured and their capacity to broaden the tax base through the use of technology is not addressed, the scope of broadening the tax base will remain limited.
Tax collection targets should be set separately for those in and outside the tax base so that its achievement of growing the latter becomes more visible”, PBC recommended.
If necessary, the FBR should phase out the fundamentally flawed turnover-based minimum tax so as not to impact tax revenues.
The FBR should gradually reduce income and corporate tax rates, as well as eliminate the disparity between the taxation of profit distribution by corporations and profit withdrawal from business by sole traders and associations of persons.
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