The country has to find an answer to low tax collections to find a lasting solution to the problem. As economy is picking up, imposition of taxes and duties and method of their subsequent collections needs to be improved. Pakistan is in dire need of foreign direct investment, but no one will risk his money in a country where taxes are overlapping and collection system is marred by complications. There is only criterion to attract foreign investment and that is to provide maximum concessions to the investors. The Chinese investors, who have invested in the China-Pakistan Economic Corridor, are given all kinds of tax breaks by various government departments, including income tax and customs departments. They are given concessions in duties and taxes. Apparently, the government is incurring a loss of about Rs 150 billion in revenue but as a matter of fact it will collect more revenue in the wake of stimulated economic activities.
The same concessions need to be extended to the investors coming from various other countries. If the political leadership is sincere in converting Pakistan into an economic and industrial hub in the region, it has to devise a fair tax collection policy. The local investors prefer to invest in Dubai, Singapore and Malaysia, but no sooner the government announces tax concession, they will also bring their money back to the country. The government has issued a statutory regulatory order under the prevailing laws to provide a series of tax exemptions and discounts to Chinese investors. There is a need to devise exemptions to the foreign investors at import stage to carry out developmental work in the country.
There are several propositions to set up industrial zones and areas along the corridor and unless the government provides concessions to the local and foreign investors, no one will come here to risk his money. Besides the Gwadar free zone project, the government is also intending to launch power and industrial projects in various parts of the country. A capacity building programme for the income tax and customs officials should be launched to streamline the tax affairs and also incorporate new changes in the prevailing tax laws. It is also important to note that many European countries, including Germany, England and Turkey are interested in the corridor project. Provisions of tax concessions mean Pakistan is politically strong and denial of concessions mean it will not only lose investment, but also friends.
