Islamabad—Federal Minister for Finance and Revenues, Dr.Abdul Hafeez Sheikh has said Pakistan needs reforms in taxation system by replacing the weak taxation machinery with efficient and vibrant tax collecting machinery for the economic prosperity of the country.
“We have a weak tax collection machinery; we have a culture of corruption; we have limited incentives; we don’t have the technology; so it is a combination of things,” he told a private TV Channel in an interview.
The Finance Minister said that the country needs reforms in the tax collecting mechanism, adding in the coming budget people would see many proposals aimed at reforms in FBR in this regard.
He said the government is very serious in reforms in FBR, because ratio of taxes to GDP of our country is just 10 per cent that is not sustainable. He added that in order to overcome the issue the government is holding political dialogue with various political parties aimed at taking every body on board and steps should be taken to enhance that tax to GDP ratio for the benefit of the country.
Dr.Hafeez Sheikh said that the main aim and objective behind the introduction of Reformed General Sales Tax (RGST) was the documentation of the national economy and bring the tax evaders into tax net. “It is often argued that we are relying on indirect taxes, but in an economy both direct and indirect taxes are levied. For levying direct taxes the government needs complete data, which can be made available from documentation of the economy,” he said.
He said there isn’t any right estimate as to how much wealth or tax able amount remained out of tax net, adding that indeed big enough amount remains out of the tax net.
He said former finance minister Shaukat Tareen had put the figure at Rs.500 billion; but even if it is Rs.300 billion or so, it is a big enough amount”, he remarked.
Federal Minister for Finance and Revenues, Dr.Abdul Hafeez Sheikh also said that the recently entire bureaucracy in the Federal Board of Revenue (FBR) has been reshuffled and competent officers been placed on the key posts.
However, he said due to prudent economic policies of the government the foreign exchange reserves have increased to over $ 16 billion; fiscal deficit was reduced to 5.3 from 7.6 per cent. He said new programmes were initiated for the under privileged masses adding that important and unprecedented steps like introduction of capital gain tax were levied on the most affluent class of the country.
Similarly the minimum taxable income was increased from one hundred thousand to three hundred thousand rupees per annum. “So an effort was made to reduce the burden of tax on the lower middle class people and five million people are being given targeted subsidy.”, he remarked.
The Minister said, one should know that tussle between two major parties in the country in the 90’s gave rise to the corruption in the state run bodies. He said corruption is the problem of other countries too but we should be aggressive enough in checking this menace. He said for the first time in the history of the country the Public Accounts Committee is being headed by the Leader of the Opposition in the National Assembly.
He said the biggest critic of the government is heading the biggest body to counter corruption; this is also the first time that many news channels are freely criticizing the government and highlighting the corruption; so there are emerging forces which are countering corruption. “Did we witness in the past the way Supreme Court is taking cognizance of the corrupt practices,” he questioned.
Hafeez said in any civilized society all institutions including judiciary and media go hand in hand. He said it was the decision of the cabinet to freeze the level of expenditures to the level of last year adding that it is planning to reduce the expenses of the state bodies to 30 per cent. Dr.Hafeez Sheikh said that the government has to give Rs.160 billion to the flood victims and Rs.300 billion are to be given to the provinces; so an environment of social security is getting emerged.
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