LAHORE: Existing valuation mechanism requires drastic changes as various sectors are suffering heavily besides there is an urgent need to strike balance between direct and indirect taxes, said a renowned businessman, Khadim Hussain.
Talking to Customs Today, Hussain, who is president of All Pakistan Stone Industry and Traders Association and executive member of the Lahore Chamber of Commerce and Industry, said that the valuation mechanism should be reviewed to facilitate the business community. He said that a large number businessmen have complained about the valuation criterion.
He urged the customs authorities to revise the valuation mechanism taking all the stakeholders on board.
He said that the industry importing the stone and granite on 5 percent valuation duty however, it has been increased to 30 percent which needs to be brought down so that the important industry could survive.
He added that the marble industry is one of the biggest exporters which is earning huge foreign reserves but the government has never announced any exporter rebate or other benefits due to which the industry has failed to flourish and explore its true potential.
While talking about the misbalance of direct and indirect taxes in economy, he said that the recent report of Senate Standing Committee on Finance about direct tax collection percentage of the total revenue collection declined to 38.27 percent in the last fiscal year from 39.91 percent in the preceding fiscal year.
Hussain said federal excise duty fell to 6.12 percent from 6.26 percent in the previous year. On the other hand, sales tax collection as a percentage of the total revenue collection increased to 42.53 percent in 2015-16 from 42 percent in 2014-15 and customs duty to 13.05 percent from 11.82 percent previously.
He said that the tax figures shows that revenue collection on account of direct taxes stood at Rs 1,191 billion out of the total net revenue of Rs 3,112 billion in the last fiscal year. On the other hand, direct tax collection stood at Rs 1,033 billion out of the total net revenue collection of Rs 2,589.9 billion.
He added that tax collection on account of federal excise duty was Rs 190 billion out of the total revenue collection of Rs 3,112 billion in 2015-16 as compared to Rs 162.5 billion in total revenue collection of Rs 2,589.9 billion in the preceding year.
The growing imbalance between direct and indirect taxes underlines structural problems and should be a matter of serious concern to the managers of the national economy, he underscored.
“Direct taxes are more progressive as they are collected directly from those who have the ability to pay, whereas indirect taxes are passed on to the end consumers and their impact on the relatively poorer sections of society is higher in percentage terms than on the richer households”, he explained, adding that over the last few years the government has begun to rely more on withholding taxes as a major component of direct tax.
This is apparent from the fact that in the current year’s budget the authorities concerned have earmarked nearly 70 to 75 percent of all direct tax collections from withholding taxes, he highlighted.
In the given conditions, what is required is to re-categorize various forms of WHT so that FBR can identify the weaknesses and shortcomings of the taxation system and devise new measures to raise the quantum of direct taxes in the total revenue collection. As it is, the existing tax structure is highly regressive in its mode and application. To correct the situation, the direct tax base needs to be widened, he concluded as saying.
