ISLAMABAD: The businessmen in a meeting at Islamabad Chamber of Commerce and Industry have called upon the government to introduce single digit sales tax rate in the federal budget 2016-17 as the prevailing sales tax in Pakistan was one of the highest having an overall unhealthy impact on the business and economic activities. They said that the sales tax rate was 2-5% in Afghanistan, 2-4% in North Korea, 5% in Taiwan and Nigeria, 7% in Singapore and Thailand and 8% in Japan, but 17% GST in Pakistan was a cause of concern for business community and the general public.
Addressing the meeting, Atif Ikram Sheikh President, Sheikh Pervez Ahmed Senior Vice President and Sheikh Abdul Waheed Vice President, Islamabad Chamber of Commerce and Industry said that high sales tax in Pakistan was enhancing cost of doing business, giving rise to inflation, squeezing the purchasing power of consumers and discouraging the growth of business activities. They stressed that government should bring it down to single digit level in the upcoming budget which will have healthy impact on business and economy.
They said government had imposed a fixed sales tax per litre on all petroleum products effective from 1st February 2016 and this decision has deprived the citizens of the full benefit of big reduction in international oil prices. They said instead of increasing prices of petrol and diesel for the month of April 2016, government should have rationalized GST on POL products as it was collecting about Rs.25 per litre on petrol in a fixed sales tax of Rs14.58 and Rs.10 as petroleum development levy in addition to about Rs.38 per litre on high speed diesel which included Rs.29.57 as sales tax.
They said the corporate income tax in Pakistan was also third highest in the world as confirmed by the World Bank report 2015 titled “Toward a More Business Friendly Tax Regime: Key Challenges in South Asia”. They said the global average corporate income tax rate was 24%, but in Pakistan it was 34% which needed to be revised downward to facilitate the growth of corporate entities in the country.
The businessmen were of the view that reducing high tax rates and cutting down number of taxes would entail beneficial outcomes for the economy as it would promote healthy tax culture, encourage people towards tax compliance, expand tax base, improve overall tax revenue and enable the country to get rid of more foreign borrowings.