- Taxation on energy sector a barrier to investment and innovation
Interview with Mr. Azeem Hussain Siddiqui – FCA, FCMA, FCIS
PAGE: Tell me something about yourself, please:
Azeem Hussain Siddiqui: I am a fellow member of Institute of Cost and Management Accountants of Pakistan (ICMA), Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Corporate Secretaries of Pakistan. Currently, I am Partner at Naveed Zafar Ashfaq Jaffery & Co. Chartered Accountants. I am an elected member of the National Council of ICMA and am currently Chairman of its National CPD Committee. I am also a member of the South Asian Federation of Accountants (SAFA) Accounting Standards Committee. Besides, I am also serving as Honorary Treasurer at Marie Adelaide Leprosy Centre (MALC), one of the largest International NGOs operating in Pakistan. I have been guest speaker at various local and international forums including professional and educational institutes / universities and chamber of commerce on the subjects of taxation and corporate laws.
PAGE: What is your take on the impact of taxes on auto sales?
Azeem Hussain Siddiqui: Taxes are essential for government’s revenue but at the same time, they create barriers in the auto market, influencing both consumer behaviour and industry dynamics. Taxes significantly impact auto sales in several ways: Higher sales taxes or excise taxes on vehicles leads to increased prices, making cars less affordable for consumers. Consumers may defer purchases or opt for cheaper or used vehicles if they perceive the tax burden as excessive, increasing the vehicle cost. This shift affects the overall health of the auto market. Whereas, on the other hand, high taxes affect manufacturers’ pricing strategies, production volumes, and even decisions about which models to offer. It has been evident in recent times the economic downturn and higher taxes have intensified declines in auto sales, as consumers prioritise essential spending over discretionary purchases like new vehicles.
PAGE: What are your views on taxation on oil and gas?
Azeem Hussain Siddiqui: The taxation of the oil and energy sectors in Pakistan has been a topic of significant debate. On one hand, tax burden on these sectors is relatively high, which impacts production costs, investment, and ultimately energy prices for consumers. On the other hand, high taxes also discourage foreign investment and hinder the development of local energy resources. As I said earlier, taxes are essential for government revenue and the government heavily relies on these taxes for revenue. However, these taxes create barriers in the market as well. Thus, an uphill task i.e. trade-off is essential to ensure both adequate revenue and a conducive environment for investment in the energy sector. This is a complex challenge for policymakers in Pakistan.
PAGE: Do you agree with the perception that exorbitant taxes on energy have become detrimental for the industry?
Azeem Hussain Siddiqui: I agree that the exorbitant energy taxes result in downsides on industry. Excessive taxation deter investment in energy infrastructure and new technologies. Companies may redirect funds away from research and development to cover tax liabilities, hindering innovation and the advancement of cleaner energy solutions. Companies operating in a global market may lose competitive advantage in high-tax countries and may move to those with more favorable tax regimes and may relocate operations to lower-tax regions, further impacting domestic job markets and economic growth.