Published Date: Dec 1, 2013
Energy reforms vital for country’s economic growth
Energy Tax reforms are critical for sustained economic growth in the country.
This was expressed by Senator Nasreen Jalil, Chair- person, Standing Committee on Finance. She was speaking at a Policy symposium organised by the Sustainable Development Policy Institute, Pakistan (SDPI) at local hotel.
While taxes matter and should be duly paid by citizens, there is also a strong need for reforms in tax mechanisms and procedures to maintain revenue collection. All exemptions and concessions allowed by the government should first be debated in parliament.
Dr. Khaqaan Najeeb, Director General, Economic Reforms Unit at the Ministry of Finance said that the government is committed to maintaining fiscal sustainability through revenue collection and reforms in the energy sector as well as in public sector enterprises (PSEs).
A harmonised tax strategy at the national-level should be devised with the help of provinces, he said. The government is aiming for a target of at least 15% for the Tax- GDP ratio. Audits and data mining will be improved in the country, He further elaborated that going forward, cheaper fuel mix will be required.
There is also a need" for reforms in GENCOS in Pakistan. Line losses, which currently stand at 21 % in the country, should be brought down to at least 16%, -he observed, Better regulation mechanisms need to be adopted with regards to the energy sector,
Senator Mohsin Khan Leghari emphasised the need to revisit the direct tax regime, since indirect taxes tend to burden the under-privileged. He also said that hydropower resources should now be adopted for energy generation in the country.
Noman Ishtiaq, Advisor SDPI, said that while Pakistan’s tax to GDP ratio remains low even compared to comparator emerging economies, the country’s debt to. GDP ratio has been on the rise and may as well become unsustainable. He further elaborated that the current SRO regime does not only cause revenue leakages but also adversely affects custom lines.
Further, there are no legal requirements to document and report the value of these losses. He said that the tax compliance should be made as easy as possible for the tax payers.
Shahid Hussain, Member Inland Revenue Policy at FBR said that focus should be on documentation of economy.
He stressed that no SRO should be passed without parliarnentary approval. Sakib Sherani, CEO Macroeconomic Insights, said that organisational improvements are required in FBR to improve taxation mechanisms and recovery. Also present at the occasion was investigative journalist Umar Cheema, who informed the audience about so many parliamentarians not registering with tax authorities or not paying their taxes.
Dr. Musadik Malik Special Assistant to Prime Minister, highlighted that ballooning supply-demand gap, inevitable increase in power prices, and theft in the power transmission and distribution systems has aggravated energy crisis.
Owing to these challenges, resorting to coal may become necessary which in turn may be environmentally detrimental. He also said that there is need to get rid of hidden and cross-subsidies in the energy and power sectors.
Speaking about the province of Balochistan, Dr. Kaiser Bengali, Advisor to the Chief Minister of Balochistan, said that up to half of the trade deficit of Pakistan is due to oil imports. He proposed that effectively utilising railway would reduce the oil consumption as transport sector consumes most of the imported oil in Pakistan.
While Thar coal may be important in meeting emerging energy needs, there is also need to develop infrastructure in the district.
Saeed Ahmed Khan, Chairman Oil and Gas Regulatory Authority, Pakistan, said that political favouritism has also been contributing to the woes of the energy sector.