The government Friday conceded that it was unable to implement taxation
measures announced in the Budget to broaden the tax base due to pressure
from some ‘influential people’ and issued 25 SROs in current fiscal
year. This was admitted by a senior Federal Board of Revenue Member here
while speaking at a seminar on tax reform in Pakistan. The FBR Member
Policy Shahid Asad said tax authorities were unable to stand against
some ‘influential people’ and issued a large number of SROs to mutate
tax proposals announced in the Budget in their favour.

He said the issue of SRO had compelled him during the last few
months to discuss the matter with the chairman. He said he had suggested
the chairman that power of issuance of SROs must be withdrawn from the
FBR and given to the Parliament because powerful people are not allowing
the FBR to implement the budget. He said documentation of economy is
the only way to broaden the tax base and also acknowledged that 17
percent GST rate is very high. The Member said that the tax leakage can
be minimised by lowering the rate. Shahid said the total number of SROs
issued so far during current fiscal year stood at 25 mostly relating to
the Inland Revenue.

Ministry of Finance consultant on Medium Term Budgetary
Framework (MTBF) Noman said different governments have allowed extensive
tax exemptions, concessions and preferential treatments. He added that
revenue leakage of 3 to 4 percent of GDP is estimated due to SPOs,
equivalent to Rs 600 to Rs 800 billion. Total revenue collection of 13
percent is lowest in the emerging economic and insufficient to meet
public expenditure 20 percent of GDP over the past five years. As a
result, the government was borrowing to bridge the gap and consequently
propelled the country into a ‘debt-trap’. Noman maintained that in
fiscal year 2012-13, more than 60 percent of total revenue was spent on
debt servicing.

He pointed out that out of a total workforce of 58 million less
than 2 million are registered taxpayers, and last year only 0.7 million
people actually paid income tax. Noman asserted that of the total income
tax collected, more than 60 percent is collected through withholding
tax which is not a good international practice.

Noman added that it is important that tax system is seen as
fair, adequate, simple, transparent, and administratively easy to comply
with and tax leakage control can increase around 6 percent of GDP
revenue collection.