SDPI releases Pre-budget Survey on Economic Reforms

Islamabad: The Sustainable Development Policy Institute (SDPI) released a nationally representative survey on economic reforms here on Friday. The survey highlights that two immediate reforms needed to kick-start economic growth and create jobs will be: a) tax reforms – to finance growing government expenditure; and b) energy reforms to support private sector’s pursuit for growth, competitiveness and market access, says a press release.

It has been noted that the downward revision in the tax collection targets should be a concern for the economic managers who are already sacrificing expenditures towards poverty reduction, education and health due to increased spending on law and order. Similarly on the energy front even before the start of full-blown summer months, industry is facing 12 hours of power shortages.

The survey reviewed that 68% respondents think that the tax system in Pakistan is neither fair nor transparent. 91% tax payers believe that their tax contributions are not effectively utilized for redistribution and welfare of the poorest. Among the informal enterprises (implying unregistered business firms), 57% stated that no incentive scheme will compel them to register with the tax authorities.

They also feel that the only way government achieves a higher income tax is by burdening existing tax payers and there are no serious efforts in widening the tax base. Sectors such as agriculture and services continue to be exempted from the tax net. 47% of tax payers feel that the filing of returns is a complex process and needs simplification. They also complained about problems with the web portals maintained by FBR for filing returns. 71% respondents felt that GST rates were too high and non-responsive to economic growth and inflationary pressures faced by the medium and low income groups.

Commenting on the survey results Dr. Musaddiq Malik, Advisor to Prime Minister on Water and Power had noted that efficient and economical production of electricity can be helped through optimal energy mix, stopping leakages and theft, increased domestic and foreign investment in energy, reduced cost of distribution, and elimination of cross and hidden subsidies. Dr. Kaiser Bengali, Advisor to Chief Minister Balochistan also explained that half of the trade deficit is due to energy related imports, which can be reduced by decreasing the share of energy in total imports.

The survey recommends that tax authorities in Pakistan need to design better and improved systems of communications and outreach in order to bridge the trust deficit and enhance public understanding of taxation mechanisms and procedures. There is also a need for increase in taxpayers’ facilitation units given the increase in the number of firms registered with the SECP. Documentation on corporate taxes needs to be simplified further, while there needs to be a strategy for transition to Value Added Taxation.  Concrete efforts should be made to curb tax evasion and elimination of SRO regime that allows exemptions.

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