Energy Tax reforms critical for sustained economic growth in the
country. This was expressed by Senator Nasreen Jalil, Chairperson,
Standing Committee on Finance. She was speaking at a Policy symposium
organized 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
harmonized 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 emphasized 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 parliamentary approval. Sakib Sherani, CEO Macroeconomic
Insights, said that organizational 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
utilizing 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 favoritism has also been contributing to the woes of
the energy sector. He also stated that private sector involvement would
encourage the efficiency in gas sector. Mohammed Ali, CEO of Engro
Powergen proposed that a fair and competitive pricing structure would
help bridge the supply demand gap and also attract much needed
investment.

Dr. Vaqar Ahmed, Deputy Executive Director, SDPI explained that in the
short term it seems inevitable that the government will increase power
prices to cover higher generation costs. It should be ensured that
future administrations should not go back to untargeted subsidies which
are politically maneuvered and it is time that provincial governments
should now be given a role in curbing theft of electricity.