They also urged the government to impose direct taxes on the rich people of the country. This resolution was moved by Asad Umar of Pakistan Tehreek-e-Insaf (PTI) in the Lower House of the Parliament, and in response the Parliamentary Secretary for Finance Rana Muhammad Afzal Khan stated that the government is taking practical measures to increase direct tax collections and widen the tax net. He said that a Tax Advisory Council has been established to resolve the issue of non-payment of taxes by the affluent.
"We have issued 77,000 notices to non-filers and passed 5500 provisional assessment orders. We are going to cancel Computerised National Identity Cards (CNICs) of those who do not respond to these notices," the Parliamentary Secretary for Finance told the House.
He said there is a need to promote tax culture in the country and parliamentarians should present their proposals in this regard and urged political parties to focus their proposals on tax collections. He said the government has to take practical steps to put the economy on the right track.
The Parliamentary Secretary on Finance said the economy has started showing positive indications and 'reforms' have been endorsed by the international financial institutions. He said the government has also reduced the burden of loans and retired 6 % of foreign loans this year.
Rana Afzal said that tax to GDP ratio was 13 percent in 1999 and has declined to 8 percent. He highlighted some difficulties in tightening the noose on tax defaulters and enhancing direct taxation on the affluent. "If we tighten the noose around defaulters, the flight of capital from Pakistan becomes more rapid," he said, adding that industrialists and businessmen start moving their wealth to those countries where generous tax incentives are offered.
Talking about the tax amnesty schemes, he said the government has introduced the scheme to improve the economy and contended that international financial institutions have declared Pakistan as a favourite country for foreign direct investment in the wake of improving economic indicators. Speaking on the resolution, Shah Mahmood Qureshi said that indirect taxation is a chronic issue and needs to be addressed at the earliest.
"We know the disease and its treatment as well but are not ready to cure it," he said, adding that it needs political will to curtail indirect taxes and levy direct taxes on the rich. Qureshi said that budget deficit ultimately pushes successive governments to go for privatisation and other available options to collect the needed money. "The budget deficit also forces governments to accept tough conditions by international financial institutions to procure loans," he said.
At the end of the day, the governments are compelled to slash Public Sector Development Programs, he said, adding that low collection of taxes also results in cuts to social sectors like health and education. Makhdoom Javed Hashmi said that Pakistan is a tax-free zone, in which the rich and elite enjoy while the lives of the poor are spent in miserable conditions. There is exploitation of the poor and they have no prospect of prosperity. He said the government should take revolutionary steps to enhance direct tax collections in the country.
Shazia Marri of PPP concurred and said that the government should take steps to strengthen the tax system and increase tax net in the country. Giving his viewpoint on the resolution, MQM member Abdul Rashid Godil said that corruption in the Federal Board of Revenue ultimately helps tax defaulters. "There is a need to introduce reforms in the FBR first to fix loopholes in the system, and we should support value addition instead of exporting raw material. We have to address the root causes of the circular debt, theft of electricity and line losses," he stated.
PML-N MNA Malik Pervaiz said that it requires a comprehensive approach to address tax collection issues. "The government inherited 8.5 percent financial deficit from the previous government but we are doing our best to plug the loopholes," he said. He said growth rate was recorded at 2.9 percent last year which is improving now. He further stated that China has promised a Foreign Direct Investment of $32 billion and rupee-dollar parity has also started showing positive signs. "The government is doing its best to ensure a smooth supply of energy to industry to improve private sector growth," he said.
Pervaiz said the government has adopted a multipronged strategy to fix the loopholes in the FBR and tax collection system. "A high-powered advisory committee comprising FBR officials has been constituted to fix the loopholes and increase tax collection," he said. However, he was quick to add that one cannot expect an overnight change. Syed Asif Hasnain, Sher Akbar Khan Amir Zaman and others also spoke on the resolution.