Interview with Mr Ashfaq Yousuf Tola –President, TOLA ASSOCIATES
Profile:
Professional Accomplishments
Memberships:
- Fellow Member of Institute of Chartered Accountants of Pakistan
- Fellow Member of the Institute of Cost & Management Accountants of Pakistan
- Life Member of Karachi Press Club
- Life Member of SAARC Chamber of Commerce and Industry
- Member of Karachi Tax Bar Association.
Key Achievements:
- Presentation to IMF on Single Stage Sales Tax in December 2015
- Visited Turkey as an official of Government of Pakistan to study Turkish Tax System and authored a report on Turkish Taxation System
- Knowledge of more than 40 Jurisdictions around the Globe and co-authored report with Dr. Hafeez Pasha on Sindh Provincial Taxation System
- International Speaker on Pakistan Economy and Non-Resident Taxation in 2018 and 2019 at Dubai, Abu Dhabi and Jeddah
- Distinction of passing CA Examinations – Intermediate & Final (both groups together in 1st attempt) as trainee of PWC A. F. Ferguson & Co., Chartered Accountants
Areas of Expertise:
- Tax Planning and Advisory
- Business Advisory Services
- International Mergers and Acquisitions
- Corporate Finance and Investment Advisory
- Due diligence and Forensic audits
- Financial Product Designing and Launching
- Public Listings and Corporate Affairs
Federal Board of Revenue, Government of Pakistan:
- Chairman Anomaly Committee (2019)
- Member Tax Reforms Implementation Commission (2016 to date)
- Member Tax Reforms Commission (2015)
- Member Tax Advisory Council (2014‐15)
- Member Taxation Reforms Co‐ordination Group (2011‐13)
- Member Revenue Advisory Council (2011)
Institute of Chartered Accountants of Pakistan:
- President (Present)
- Member Overseas Coordination Committee (2018)
- Member Regional Committee – (Southern Region) (1993 – 1996)
- Secretary of Regional Committee (Southern Region) (1996)
- Member Education and Training Committee (1994‐95 95‐96 96‐97)
- Member Technical Services Committee (1992‐93 93‐94)
- Chairman Chartered Accountant Students’ Association. (1993)
Institute of Cost & Management Accountants of Pakistan:
- Secretary of Karachi Branch Council (KBC) (1995 and 1996)
- Elected Member KBC and Convener Seminar and Publication Committees (1992‐96)
- Member Technical Committee
- Member Research Committee
Karachi Club
- President (2012 and 2013; and 2016 and 2017)
- Honorary Secretary (2008)
- Member Managing Committee (2003, 2004)
Professional Experience
- President Tola Associates April 2017 to date
- Senior Partner Naveed Zafar Ashfaq Jaffery & Co, Chartered Accountants, a member firm of Prime Global International 2012 to Present
- Partner Nasir Javaid Maqsood Imran Ashfaq, Chartered Accountants 2011 to March 2012
- Principal Strategic Officer in Stallion Textiles (Private) Limited. 2008 to 2010
- Chief Executive Officer in Fincon. 2000 to 2007
PAKISTAN & GULF ECONOMIST had an exclusive conversation with Mr Ashfaq Yousuf Tola regarding FEDERAL BUDGET 2022-23. Excerpts of the conversation are as follows:
Finance Bill 2022-23 (The Bill) for the fiscal year 2022-23 was laid before the National Assembly and the Senate on June 10, 2022. The bill has proposed amendments in Income Tax Ordinance, 2001 (ITO), Sales Tax Act, 1990 (STA), Federal Excise Act, 2005 (FEA) among other laws. The Federal Government has announced Budget for the year 2022-23, emphasizing on ‘expansionary fiscal policy’ despite high fiscal deficit, aimed to achieve balance between countering structural imbalances and moving towards sustainable growth. As per the government, inclusive and sustainable budget announced to bring back economy on track. Pakistan’s GDP growth expanded to 5.97% as per provisional estimates 2021-22. Despite a steady growth in FY22, in comparison to the GDP growth in FY21, the growth in the outgoing fiscal year is fueled with imports and is consumption oriented, which creates a huge external sector pressure on the economy.
Official figures show that from July to May of outgoing Fiscal year 2021-22(FY22), FBR’s tax revenue stood at Rs.5,349 billion –28.46% or Rs.1,185 billion higher against FY21 collection of Rs.4,164 billion. It still needs Rs.651 million more to reach the targeted revised tax revenue of Rs.6,000 billion for FY22. Reaching the target revenue seems likely possible if the Government took more administrative measures in the remaining period.
If the inflation is projected at 11.5% and GDP growth at 5.0% in the upcoming fiscal year, then the FBR might easily collect PKR 6,990 billion worth of revenue. However, in our humble view the Government should collect PKR 7,500 billion worth target given the implementation of enhancing tax base. Unfortunately, Pakistan is facing a challenge of a huge parallel base economy, as approximately 43% of the nominal GDP is not contributing significantly towards the direct tax collection, such as traders and agriculturalists. The Government has to urgently need to tap the potential of these sectors for their optimum contribution towards the national exchequer which will not only remove inequities in the tax regime, but will also provide much- needed additional revenue to the government.
The realistic target, therefore, might be more than Rs.7 trillion given the potential of the economy. However, in current scenario, where the Government wants to sustain huge external sector imbalances by curbing the import bills, given the higher tax collection at import stage, it might be not easy even to collect $7 trillion until unless they broaden the tax base.
Regarding the non-tax revenues target of Rs.2,000 billion in budget 2022-23, federal government is relying mainly on petroleum levy to accomplish its targets and estimate massive funds worth Rs. 750 billion in 2022-23, which is 455 times higher than last year’s revised estimates of 2021-22.
Federal Government’s fiscal deficit would be around Rs. 4,598 billion during 2022-23 but if government incorporate estimated provincial surplus of Rs. 800 billion. Then only, the overall fiscal deficit of the country would be Rs. 3,798 billion during 2022-23.
The financing of the budget deficit is the most critical factor for the economy and financing of fiscal deficit to remain a key challenge for the policy makers. Federal Government has had high fiscal deficit of 8% of GDP in 2021-22. While projected figure of fiscal deficit would be 5.9% in 2022-23. After experiencing three year consecutive high fiscal deficits, which is unprecedented in the history, Government moves towards the path of lowering the fiscal deficit.
The next year’s primary deficit is estimated at Rs. 648 billion which is 0.8% of GDP. Whereas, a primary surplus is estimated at 0.2% of GDP, after incorporating provincial surplus of Rs. 800.
Country’s larger share of taxes comes from indirect taxes which is contingent with the economic activity and GDP growth. If tax base is not going to increase, moving forward, country’s tax revenues growth to drop further and it might end up dead weight loss to the economy.
Pakistan has achieved almost all economic targets including agriculture sector, industry, services sector, tax revenue, investment etc. Next fiscal year’s targets mainly depend on how government will regulate more financial inclusion in the economy and ensure structural balances.