Interview with Syed Shariq Waqar, FCMA
PAKISTAN & GULF ECONOMIST had an exclusive conversation with Syed Shariq Waqar vis-a-vis Tax Challenges in Pakistan. Following are the excerpts of the conversation.
Taxation is always treated as a sword on economic growth whether at macro level or at micro level. Common man is always afraid of tax. Tax authorities are always considered as villain as shown in movies. Taxation system has been simplified and has become nation serving tool in the developed countries. In the third world countries where education is not standard, poverty is a big issue and feudal lords control the taxation system, tax becomes a nightmare for everyone. In Pakistan, taxation system now has become a very complex tool. Every year we spend a lot of money just to understand the impact of any new taxes, how they are calculated and what is their debit and credit and how they need to be handled or how to avoid. Propaganda, strikes, debates on media, seminars and many more events are held just to handle few percentage increases or decreases in a tax.
Now back to economic growth. What common basic needs are:
a) Food
b) Shelter
c) Education
d) Health Service
What businessman wants:
a) Ease of doing business
b) Higher profits
c) Zero taxation
How these goals can be achieved is a million-dollar question. The four demands of a common man can’t be achieved without imposing taxes, and three basic demands of entrepreneurs especially the second one is difficult to digest by the government officials.
The four basic demands of a common man are their right. As most of the developed western nations are doing and this is also the basic reason of migration from third world to the western world.
Whenever three demands of businessmen were not fulfilled, they immediately went on protest, make associations and pressurize the high ups. On the other hand, if businessmen give up raising their hands and not make money, common men also get hurt because their all four desires are only fulfilled through businessmen from where they earn money.
In developed nations, the basic necessities of common men are taken care by government through their taxes, while in third world countries government always cries for deficit budget and raises a ‘begging bowl’ for loan. What’s the solution for this challenge. In my opinion, in countries like Pakistan as we have quite complicated taxation structure, we have Sales Tax, Income Super Tax, Withholding Tax, Federal Excise Tax , Provincial Tax, cantonment boards , stamp duties and many more, which cause nothing in this hi-tech business world just increase time of transaction and cost of doing business.
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Just imagine how complicated this tax structure is and how complex it is to handle such complicated calculations wisely and prudently with the lack of qualified and trained personnel. Although taxation authorities have their built-in system on the basis of which they are running the whole show. But nowadays modern technology and usage of good hi-tech ERP systems make life easier. In my opinion, the government should slash all these taxations and make everybody’s life easier. Now the question is how government affairs will be run because government needs money to run the state affairs, and how common man will compensate and how the national infrastructure like roads , hospitals, dams , sewerage systems can be built. The answer is quite simple. Lets businessmen do their job. They will create employment opportunities, which is a social service too. The government just needs to have an eye to control profit margin of the businessmen.
For example, we have about 6 trillion PKR funds required for running of governmental affairs, so we have more than 60,000 registered Public and Private Ltd, Business organizations in Pakistan plus a parallel size of other mode of business, therefore on the basis of their revenue they pay certain fixed amount as taxation fee. For example, a billion rupee turnover company will pay 10 million rupee as fixed tax regardless of whatever amount of profit they would earn. Another million-dollar question is arising that how we ensure the amount of revenue of these organizations. It is very simple through their last tax returns and through their audited accounts, and create a benchmark and charge the fixed tax, through this method the phenomena of Ease and Cost of Doing Business both will be achieved. Especially for entrepreneurs all unseen cost of taxation will become “ZERO”. Their profit would be higher. Government kitty will increase, there will be no panic situations like shut downs. Life styles will rise.
From Costing and Accounting point of view treatment of this fixed tax becomes more easier and simplified because tax payer will know his exact burden and it is hassle free from input out claims and refunds issues.
Human resources of the country will do more productive activities.
One very basic issue is that the ‘distrust’ needs to be diluted between Tax Authorities and Entrepreneurs. They both think that they are not fair to each other. Tax authorities think tax payers not paying the exact amount of their due tax, while on other hand tax payers think their paid tax is not utilized properly. People want to pay charity even on many occasions especially to street beggars sometimes unfairly but don’t want to pay tax just because of distrust.