This document discusses corporatization and taxation issues in Pakistan's economy based on data from the Securities and Exchange Commission of Pakistan (SECP) and Federal Board of Revenue (FBR). It notes that while over 64,000 companies are registered with SECP, only around 24,000 file tax returns with FBR each year, leaving a gap of around 40,000 non-filers. It analyzes sector-wise company registration trends and financial information. Low corporatization is attributed to over-taxation, multiple taxes, and an unfriendly tax regime. Solutions proposed include improving enforcement, securitizing tax debts, and taxing non-filers and nil filers identified by FBR.

1. CORPORATIZATION OF
ECONOMY-A DILEMMA
FOR PAKISTAN
BY
SYED MUHAMMAD IJAZ, FCA, LL.B.
PARTNER
HUZAIMA IKRAM & IJAZ

2. CORPORATE ENTITIES REGISTERED WITH SECP
• 64,067TOTAL COMPANIES REGISTERED WITH SECEP
• 580PUBLIC LISTED
• 2,260PUBLIC NON LISTED
• 57,650PRIVATE
• 1,792SMCs
• 634ASSOCIATIONS NOT FOR PROFIT U/S 42
• 71COMPANIES LIMITED BY GUARENTEE U/S 43
• 228TRADE ORGANIZATIONS
• 847FOREIGN COMPANIES
• 2PUBLIC COMPANIES WITH UNLIMITED LIABILTIY
• 1PRIVATE COMPANIES WITH UNLIMITED LIABILITY
• 2COMPANIES U/S 503 (2)

3. COMPANIES LIMITED BY SHARES
• 62,282TOTAL COMPANIES REGISTERED
WITH SECEP LIMITED BY SHARES
• 580PUBLIC LISTED
• 2,260PUBLIC NON LISTED
• 57,650PRIVATE
• 1,792SMCs

4. CAPITALIZAITON BREAKDOWN
PAID UP
CAPITAL
FROM-UP
TO
UPTO PKR 100,000
FROM 100,001 UPTO
500,000
FROM 500,001 UPTO
1,000,000
FROM 1,000,001 UPTO
10,000,000
FROM 10,000,001
UPTO 100,000,000
FROM 100,000,001
UPTO 500,000,000
FROM 500,000,001
UPTO 1,000,000,000
FROM 1,000,000,001
AND ABOVE
TOTAL
LISTED
CO.
3
0
0
16
161
206
73
121
580
UNLISTED-
PUBLIC
CO
389
283
102
335
634
327
80
110
2,260
PRIVATE
CO.
21,518
8,736
6,321
15,867
4,297
752
80
79
57,650
SMCs.
1,118
295
168
150
57
3
1
0
1,792
TOTAL
23,028
9,314
6,591
16,368
5,149
1,288
234
310
62,282
%AGE
36.97
14.95
10.58
26.28
8.27
2.07
0.38
0.50
100.00

5. NEW COMPANIES REGISTERED WITHIN LAST 5
YEARS

6. DOMICILE OF FOREIGN COMPANIES
Country Newly incorporated companies FY Number of companies as of
2013-14 30-Jun-14
US 1 156
Uk 2 119
Fracne 1 26
Germany 2 25
China 7 45
Japan 1 38
Australia 0 20
Middle Eastern countries 2 62
Far Eastern countries 4 119
Other European countries 2 130
Other Asian countries 0 14
Other countries 0 93
Total 22 847

7. SECTOR WISE BREAKUP OF COMPANIES
Sector
Newly incorporated companies for
the financial year ending june 30,
2014
Total companies as of June 30, 2014
Auto and allied 60 787
Broadcasting and Telecasting 68 567
Cables and electric goods 42 682
Carpets and Rugs 3 71
Cement 2 102
Chemical 75 1,643
Pharmaceutical 128 1,390
Communications 173 2,662
Construction 306 3,162
Corporate agriculture farming 195 1,225
Education 132 999
Engineering 108 1,842
Finance and banking 33 1,089
Food and beverages 166 2,443
Footwear 5 75
Fuel and energy 82 1,250
Ginning 8 350
Glass and ceramics 5 260
Healthcare 68 578
Information technology 367 2,947
Insurance 11 284
Jute - 20
Leather and tanneries 16 368
Lodging 22 462
Mining and quarrying 66 572
Paper and board 87 1,142
Power generation 125 858
Real estate development 99 1,319
Services 520 7,182
Sport goods 12 199
Steel and allied 23 508
Sugar and allied 10 180
Synthetic and rayon 3 194
Textile 141 4,662
Tobacco 4 86
Tourism 421 6,706
Trading 544 7,310
Transport 99 1,286
Vanaspati and allied 23 453
Wood and wood products 11 215
Miscellaneous 324 5,937
Total 4587 64067

8. COMPANIES WHO FILED INCOME TAX RETURN
WITH FEDERAL BOARD OF REVENUE
•23,859TAX YEAR 2013
•24,195TAX YEAR 2014
•336TAX BASE
ENHANCED YOY

9. GAP ANALYSIS- SECP VIZ A VIZ FBR
COMPANIES REGISTERED
WITH SECP
COMPANIES FILED
INCOME TAX RETURN IN
TAX YEAR 2014
DIFF./NON FILERS
•64,067
•24,195
•39,872

10. GDP ANALYSIS OF REGIONAL COUNTRIES
Pakistan BanglaDesh SriLanka India HongKong SingaPore Malaysia Turkey
Annual data 2014a
2014a 2014a
2014a
2014a
2014a
2014a
2014a
Population (m) 185.1 158.8 21.4 1,256 7.3 5.5 30.2 76
GDP (US$ m; market exchange rate) 246.6b 178.2 74.95b 2,133 289.6b 307.9 326.93b
799b
GDP (US$ m; purchasing power parity) 896.4 497 217 7,366 398 448.8 747 1,473
GDP per head (US$; market exchange rate) 1.33 1.12 3.50 1.70 39.89 56.29 10.83 10.51
GDP per head (US$; purchasing power parity) 4.84 3.13 10.13 5.87 54.82 82.05 24.76 19.37
Exchange rate (av) Respective currency:US$ 101.1b
77.61b 130.6b
61.0b
7.754b 1.27 3.27b
2.19b
Historical averages (%) 2010-14 2010-14 2010-14 2010-14 2010-14 2010-14 2010-142010-14
Population growth 1.7 1.2 0.8 1.2 0.6 1.9 1.7 0.9
Real GDP growth 3.5 6.1 7.4 4.6 2.3 6.4 5.8 5.4
Real domestic demand growth 3.3 5.9 8 4.2 3.4 5.2 8.1 5.6
Inflation 9.9 7.9 6.1 7.2 3.6 3.2 2.4 8.1
Current-account balance (% of GDP) -1.3 1.3 -4.8 -3.1 3.5 20 7.4 -6.3
FDI inflows (US$ m) 0.7 0.9 913.1 1.6 34.3 20.7 4 1.6

11. TAX TO GDP RATIO
CountryName CountryCode IndicatorName 2008 2009 2010 2011 2012
Afghanistan AFG Taxrevenue(%ofGDP) 6.04 8.43 9.12 8.85 7.47
Bangladesh BGD Taxrevenue(%ofGDP) 7.66 7.50 7.83 8.69
HongKongSAR,China HKG Taxrevenue(%ofGDP) 12.72 12.50
India IND Taxrevenue(%ofGDP) 10.75 9.64 10.19 8.98 10.79
Malaysia MYS Taxrevenue(%ofGDP) 14.66 14.94 13.74 15.24 16.10
Pakistan PAK Taxrevenue(%ofGDP) 9.49 8.94 9.98 9.19 10.10
Singapore SGP Taxrevenue(%ofGDP) 13.85 13.07 12.97 13.36 13.97
Turkey TUR Taxrevenue(%ofGDP) 18.52 19.16 20.49 20.14 20.38

12. WHY LOW CORPORATIZATION IN PAKISTAN
• Multiple taxes on same source
• Bonus Shares
• Dividend
• Dividend in specie
• Capital gain on Sale of securities
• Tax on Reserves-proposed
• Stringent withholding tax regime
• Heavy cost of withholding of taxes without any incentive for the collection agent. Instead punitive
measures are used in case of failure to deduct tax.
• Withholding of taxes even from persons otherwise not even required to file return-Like mobile users and
leaving the rich to get away by paying only withholding tax
• Highhandedness of Taxing Authorities
• Repetitive investigations/Multiple audits/Undue calling of information
• Grudges and infective attitude
• Gratifications/Teaming with tax evaders'
• Lack of knowledge on impact of Industry

13. WHY LOW CORPORATIZATION IN PAKISTAN-
CONTINUES
• Over Taxation
• Tax rates under first Schedule
• Taxation of dividend and Interest on Securities on normal rates as compared to
concessionary rates-Proposed amendments through Finance Bill 2015-16
• Surcharge for IDPs
• Lack of desire to work hard
• Lack of co-ordination between various government tax collecting agencies
• Lack of strong field work
• Excessive Dependence on withholding taxes
• Lack of enforcement is a major issue

14. CURRENT UTILIZATION OF BUDGET
Total Projected Tax Receipts
Debt Servicing
Shares of Provinces
Defense Spending
Balance for Federation
• PKR (In b)=3,418
• Interest PKR (in b)= 1,280
• PKR (In b)=1,849
• PKR (In b)=781
• PKR (In b)=(492)

15. CORPORATE INCOME RETURN ANALYSIS- 2014 &
2013 YOY
2013 2014 YOY 2013 2014 YOY
FROM TO NOOFRTRN NOOFRTRN DIFF. AMOUNTPAID AMOUNTPAID DIFF.
PKR PKR PKR PKR PKR
- 10,653 10,782 129 - - -
- 100,000 3,529 3,059 (470) 112,302,442 100,849,166 (11,453,276)
100,000 1,000,000 4,724 4,697 (27) 1,923,160,301 1,937,450,992 14,290,691
1,000,000 10,000,000 3,376 3,832 456 11,729,700,528 13,447,256,836 1,717,556,308
10,000,000 100,000,000 1,276 1,488 212 39,616,089,471 45,460,900,733 5,844,811,262
100,000,000 500,000,000 222 239 17 46,845,311,806 50,626,052,729 3,780,740,923
500,000,000 1,000,000,000 34 49 15 22,854,782,695 33,432,369,231 10,577,586,536
1,000,000,000 45 49 4 192,778,203,515 196,166,984,865 3,388,781,350
23,859 24,195 336 315,859,550,758 341,171,864,552 25,312,313,794

16. TOTAL RETURNS FILED TAX YEAR 2014 & 2013 YOY
2013 2014 DIFF.
I TAX RETURNS FILED NOS NOS YOY
COMPANIES 23,859 24,195 336
AOPs 42,749 40,763 (1,986)
INDIVIDUALS 814,654 791,271 (23,383)
TOTAL 881,262 856,229 (25,033)

17. SOLUTION TO THE PROBLEMS
• Correcting the tax net to catch big fishes currently escaping untaxed. This can
only be achieved by improving enforcement.
• Securitization of Debts
• Taxing what FBR already has in its hands-Non filers and Nil filers

18. THANK YOU VERY MUCH