Tax Reforms of Exports in Pakistan Vaqar Ahmed Sustainable Development Policy Institute www.sdpi.org

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ned questions m
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why it is har
experiment
generate exp
key issue is
policy, tax a
are contribu
performanc
exports?
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from becom
entities? Th
between the
government
The governm
are no taxes
argument w
disagrees. T
is the differe
rated regim
believes tha
of the world
refund’. How
current gov
that an expo
then apply t
(FBR) for re
given rise to
and delays i
creating a li
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end up payi
harder for n
as monthly
includes hir
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something w
annual audi
an addition
statement r
specialised
justify the ta
introduction
the balance
w near to ye
ntity in Pakistan
o establish a tra
n and tax regim
ir and just soci
ely, the Panam
minishes the tru
intentions to m
mentioned surv
rd to convince
with new idea
portable surplu
that our tax re
administration
utors to less tha
ce of businesses
x regime preve
ming larger and
here is a signific
e answers to th
t versus private
ment actually b
s on exporters i
with which the p
The key reason
ence in interpr
me. The busines
at zero-rating, l
d, should imply
wever, in case
vernment, zero
orter should fil
to Federal Boar
efund — somet
o human interf
in release of ref
iquidity crunch
stem where eve
ing direct and i
new SMEs and
filing of tax ret
ring a complete
dit department
which they can
it by revenue a
al burden on th
equiring them
services of acco
axes statement
n of advance ta
sheet of nasce
et another b
n. The state has
ansparent
me which may b
ial contract.
ma Papers episo
ust and confiden
move towards a
vey also explain
firms to take r
s and scale up
us in Pakistan.
egime including
and tax cultur
an desired
s and particula
enting new SM
d exporting
cant difference
his questions fro
e sector.
believes that th
in Pakistan — a
private sector
for disagreeme
retation of zero
ss community
like in other pa
y ‘no tax no
of the past and
rating has mea
le their due tax
rd of Revenue
thing which has
face, corruption
funds in turn a
h for the export
en zero rated fir
indirect taxes, i
startups to gro
turn which
e accounting an
t may not be
n afford. The
uthorities will
heir expense
to also hire
ountants who c
ts and refunds.
ax further burd
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budget, it i
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ustment (on ke
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wing adjustme
ks and laborato
ducation and s
justified. A rec
toms and regul
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ers seen in plac
achi.
haps, it will als
solidation of re
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orm Commissio
s is essential as
n visiting the F
unds, provincia
unds (until 2013
eipts against in
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propriate to
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nto the future
hanism in Paki
a short term ins
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ent for long ter
nd bolstering k
nswer is latter t
exporters of in
y inputs such a
reasonable. Sim
ent on imported
ory equipment
skill developme
cent example is
latory duties ki
usands of low c
ces such as Kho
so be of benefit
efunds mechan
in the report o
on, may be imp
s currently expo
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al sales tax on s
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come tax credi
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and refunds aga
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Vaqar Ahm
o consider h
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istan. Do we
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plemented.
orters are
ax on input
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it section
g sales tax
ainst
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med April
how Pakista
es with hig
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difficult is
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Second, St
research in
imported c
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business ar
economica
the world t
this source
compromis
of taxation
Pakistani i
customs du
(GST) with
another sla
duty, and e
minimum
in other co
of food sec
new startu
Interesting
of regulato
annually an
slapped in
orts
l 16, 2017
an can mov
gher numbe
mber of taxes p
rld Bank’s Ease
stani businesse
fferent taxes. W
ting business ex
the plethora of
almost same or
the overall tax
tate Bank of Pa
ndicates a signi
content require
exports. It is go
re allowed to s
al raw material
to process expo
e of competitive
sed due to the
n on imported g
imports are sub
uty structure; g
h standard rate
ab of 5 per cent
excise duties. T
thresholds for
ountries and ju
curity, educatio
ups.
gly, the most re
ory duties was n
nnounced bud
the middle of t
ve towards
er of taxes
section-66. Al
will be a good
to reduce the
human interfa
and perhaps a
an IT-enabled
system to
determine and
process refun
releases, there
closing the do
of rampant
corruption at
tax authoritie
It is precisely
to the above-
mentioned re
that Pakistan
remains in the
of countries w
per year. Accord
e of Doing Busi
es during 2016
What makes the
xpenses more
f withholding t
r in some cases
xes applicable o
kistan’s own
ificant amount
ed to manufact
ood that Pakista
ource the most
s from anywhe
orts. However,
eness has also b
complex struct
goods.
bject to a three
general sales ta
e of 17 per cent
t, import regula
There is usually
imports often
stified on grou
on, or even to h
ecent introduct
not part of the
get and rather
the fiscal year
a fairer and
s per year.
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d idea
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at b
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wo
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thout a mandat
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t. Such instanc
e uncertainty ar
d prevents busi
ue to the compl
der the current
scading’ of the
ain leading to a
r both business
plies that even
GST can lead to
penses (tax on
e actual GST ra
se of raw mater
d other inputs l
ntraction throu
rking capital a
uring the mediu
stribution, mar
terprises are ne
us, in overall te
d up with lower
centives for pro
wards a more co
x can provide a
aling with casca
oviding improv
erall economy.
nally, now that
wn tax revenue a
mbitious to raise
ce the burden o
yments and fac
ovincial sales ta
venue and prov
art from the FB
duced if tax rate
hich rates are ap
the provinces t
ngle tax return s
venue authoriti
llection of tax s
ngle collection c
e now have exa
ying to introduc
both Central an
ordinated struc
xation in Pakist
mpliance costs
constitute an in
rking group wh
egime to bo
tory debate in t
ing a formal pa
ces of ‘mini bud
round Pakistan
inesses from sc
lexity of input i
t GST regime in
e indirect tax is
a rise in cost of
ses and individu
n a small chang
o an inter-sect
tax) which is h
ate. This ‘tax on
rials, intermed
leads to produ
ugh decreased a
and consumer s
um term marke
rgins of the priv
egatively affect
erms tax autho
r revenue colle
oduction are hu
comprehensive
second best so
cading, besides
ved documenta
the provinces
authorities, wh
e own revenue
of filing tax retu
cing audits of m
ax authorities,
vincial excise d
BR. These costs
es and income
pplicable may b
themselves, ho
should be filed
ies are integrat
should be sole t
company.
ample from Ind
ce a single tax r
nd State levels.
cture of federal
tan can bring d
and for this it
nter-governme
hich should me
oost export
the
art of Finance
dgets’ add to
n’s tax policy
caling up.
invoicing
n Pakistan, a
observed —
f compliance
uals. This
e in the rate
oral tax
higher than
n tax’ in the
iate goods
ction
availability of
spending.
eting and
vate
ted.
orities also
ection as
urt. Moving
value added
olution of
also
ation of the
have their
hich are
s, exporters
urns, making
multiple
boards of
epartments
s can only be
sources on
be decided
owever only a
d once all
ted, and
task of a
dia which is
return form
. Only a more
l-provincial
down the
is important
ental tax
eet on a
ts
monthly b
mentione
instances
same inco
As we dra
most app
can move
regime. L
the fiscal
a) broade
reliance o
reforming
simplifica
removal o
indirect ta
excise dut
transpare
ensuring
by all sect
industry a
exemptio
scientific
expeditin
both fede
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basis to implem
ed measures an
of double or m
ome source of b
aw near to yet a
ropriate to con
towards a fair
ike in most effi
regime should
ning of direct t
on regressive w
g indirect tax ra
ation and reduc
of federal-provi
axation, phasin
ty, and putting
ent customs dut
a more balance
tors of the econ
and services an
ns which canno
or welfare grou
g tax administr
ral and provinc
s.thenews.com
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ment the above
nd also remove
multiple taxatio
businesses.
another budget
nsider how Pak
rer and just tax
ficient tax syste
d transition tow
tax base with le
withholding tax
ates through
ction in GST ra
vincial multiple
ng out of federa
g in place a mor
uty structure, c)
ed tax contribu
nomy i.e. agricu
nd removal of t
ot be justified o
unds, and d)
ration reforms
cial levels.
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