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Tax system needs centralisation, technological progress

Tax system needs centralisation, technological progress

Interview with Mr. Danish Younus — tax expert

PAGE: Tell me something about yourself, please:

Danish Younus: I have been associated with the field of accountancy, finance and taxation for almost 20 years. During this period, I have worked in many companies, most of which were related to the textile sector, which gave me the opportunity to closely observe the textile industry in Pakistan. Textile industry is considered economic backbone of Pakistan which earns a large amount of foreign exchange through exports.

PAGE: Could you give your perspective on the tax system in Pakistan?

Danish Younus: At the outset, for better understanding, we have to segregate it federal taxation and provincial taxation. Federal government is responsible to collect income tax and sales tax on goods including various duties such as custom duty, federal excise duty, regulatory duty etc. On the other hand, provinces are responsible to collect sales tax on services, property tax, motor vehicle tax, professional tax including various duties such as stamp duty, cotton fee etc. So basically in Pakistan, the system of taxation is decentralised. So it can be strongly recommended that it should be centralised through formation of single tax authority, which should be responsible to enforce all applicable laws and ensure the tax collection in appropriate manner. However, for distribution of such collection between federal and provinces, the mechanism should be formulated. Through the formulation of single tax authority it would be more convenient to facilitate taxpayer through one window operation. On the side of tax collection authority, I must say that the collection will be made more efficiently and the chances of tax evasion and fraud will be minimised significantly as such authority would have all the powers which is being exercised through various tax commissioners/collectors/authorities.

PAGE: What is your standpoint on the adverse impacts of regressive tax on business activities?

Danish Younus: According to my perspective it is one of the biggest hurdles in the way of progress of business activities. As we all are aware that the collection of taxes is directly proportion to the business activities and when we opt the regressive taxation measures then obviously cost of doing business will be increased and business communities would not motivate the expansion of their business.

Besides, such measures will provide food for thought to the business community may have to adopt the malpractices in business and disclose understated profits. We have to consider it very seriously and introduce business-friendly laws and regulations and focus to increase number of taxpayers instead of number of taxes.

PAGE: What is your take on the revenue collection during the current year?

Danish Younus: By the end of fiscal year 2022-23, FBR collected around Rs7 trillion. This is first time that we have crossed the figure of Rs7 trillion. I personally understand that the number one reason behind this number is inflation, as in Pakistan most of the collection were made through indirect mode even in case of income tax massive tax collected through various types of withholdings.

On the other side of the picture when we compare it with our GDP it is clear that we have collected half of our potential which is not good. Government should take serious measures to create business-friendly environment so the objective of ease of doing business will be achieved because the tax revenue collection is link with business obviously though this various new business or startups will begin and the tax collection will be improved.

Further, must take direct taxation measure in to rich people. I think in current taxation system, provinces need to improve their taxation collection and focus on property tax and agriculture tax but first need to improve economic condition otherwise it will be burden on common man and finally I would like to address very importantly that respect should be given to taxpayers.

PAGE: What is your take on the use of technology by FBR?

Danish Younus: Use of technology is essential, FBR should adopt latest technology for improvement of administration and minimisation of corruption. Currently, FBR has upgraded systems such as IRIS, PSW etc. but it needs to be further improvement. The system bring into line with AI and capable to identify potential taxpayers who are still not in the tax net. System generated auto approval mechanism would also define through this the due benefit can be given to taxpayer on merit.

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