- Need of long-term reforms for fixing the export challenges
Interview with Mr Azeem Hussain Siddiqui — Tax Expert
PAGE: Tell me something about yourself, please:
Azeem Hussain Siddiqui: Born at Hyderabad Sindh, I had my early education in that city and then settled in Karachi for last 30 years. I am a Fellow Member of Institute of Cost & Management Accountants of Pakistan as well as of Institute of Chartered Accountants of Pakistan.
Currently serving as Partner at Naveed Zafar Ashfaq Jaffery & Co. Chartered Accountants. Previously have served KPMG Taseer Hadi & Co. Chartered Accountants. I am also Chairman of Karachi Branch Council of ICMA Pakistan. Besides, I am Vice President of Pakistan Quiz Society International. I have been Guest Speaker and Lead Trainer at various seminars and workshops on topics relating to corporate, tax and other laws in Pakistan.
PAGE: What is your perspective about outlook for tax collection in current fiscal i.e. June 2023?
Azeem Hussain Siddiqui: The Government has been making rigorous efforts increasing the tax collections in the country and had managed to cross its tax revenue estimate for the fiscal year 2021-2022 as it collected Rs. 6,125 billion as against the revised upward target of Rs. 6,100 billion.
Even the provisional revenue collection figures released by the Federal Board of Revenue for the for the first quarter of fiscal year 2022-23 exceeded the target of Rs. 1,609 billion by Rs. 26 billion. This performance in revenue collection is despite zero rating of sales tax on POL products, import compression and the prevailing situation of floods.
However, it may be noted that according to provisional figures, after exceeding the targets for the first quarter, FBR missed its collection target for October by Rs. 88 billion i.e. collections were 512 billion as against the target of Rs. 600 billion.
I understand that the decline was attributed mainly to the extension allowed for filing the tax returns from September 30th to November 30th. With robust revenue mobilization strategy and effective enforcement of tax laws, it is expected that the tax collection figures for the second quarter as well as for the remaining part of the year will improve and the target tax revenue for the fiscal year 2022-23 will eventually be met.
PAGE: What could be the impact of dwindling exports on revenue by the end of June 2023?
Azeem Hussain Siddiqui: The decline in exports has severe implications for the country’s productivity growth, foreign exchange and the job market. The major factors behind our dwindling exports include high effective import tariff rates, limited long-term financing facilities for exporters to expand their export capacity, limited market access and low productivity issues for the business enterprises.
In order to square up the core challenges for Pakistan to compete in global markets, the country needs long-term reforms for fixing the export challenges and it requires close coordination between governmental agencies at provincial as well as federal levels. In order to achieve this we need to harmonise policy decisions and to ensure their effective implementation. Active public-private sector dialogue is also essential to secure the broadest support for such reform.
PAGE: How would you comment on the taxation on corporate sector?
Azeem Hussain Siddiqui: Corporate sector has been performing well when it comes to tax contribution to the exchequer. This is so because it is largely the ‘well-documented sector’ of the economy. The corporate tax rates are reasonable and tax-payer friendly with government is making concentrated efforts for ease of doing business. Having said that, it is also important to note that the recently imposed super tax has raised concerns for the corporate sector as they consider it to be as an extra burden that has been imposed over and above the tax payable on their taxable income.
PAGE: Are the current tax policies favourable for the investors?
Azeem Hussain Siddiqui: I am of the view that the straight answer to this questions is a ‘mix’. I personally feel that while number of efforts are being made to increase the tax base, widen the tax net and to boost investors’ confidence in the country, there have been a number of steps and which are not taken well among the stakeholders.
On one hand, the government has been removing irritants and hindrances so as to have ease in doing business and to bring more investments. Tax credits and accelerated depreciation etc. are being offered for betterment and modernization of plant and machinery etc. Similarly, Incentives given for Roshan Digital Accounts (RDAs) and for construction sector were good steps for bringing investment. However, at the same time, there have been steps that are resulting in divestments. Recently withdrawn tax credit on investment under section 62 of the Income Tax Ordinance, 2001 is a big blow for the investors.
Similarly, recently introduced tax on deemed income on capital assets has also shaken investors’ confidence and has open doors for litigation. Failure of FBR field force to widen the tax net has resulted in squeezing tax from the already registered taxpayers. Consequently, the existing/honest taxpayers also find themselves in doldrums and feel themselves at the mercy of high handed tax authorities.