New tax regime irks Pakistan government allies

ISLAMABAD - The Pakistan government is now feeling the heat from its allies on charges of not taking them into confidence on important decisions like imposition of “reformed” general sales tax (GST) that aims to broaden the tax net and cut down on inflation.

The government has decided to cut down GST from 17 percent earlier to a flat 15 percent. The move is intended to levy it across the board to include sectors that were not being taxed earlier.

However, the decision has drawn huge opposition from political parties and traders alike.

Senator Kamil Ali Agha of the PML (Quaid) said Friday that “the decision has been taken without consulting the stakeholders and was likely to prove counter-productive”.

MQM legislator and federal minister Farooq Sattar said: “The government had assured us of not taking a unilateral decision on this subject but it failed to do so.”

Industry associations too criticised the decision.

“The move will derail the industry which is already reeling from the lack of electricity and gas,” said Federation of Pakistan Chambers of Commerce and Industry (FPCCI) chairman Sultan Chawla.

Former FPCCI president Tariq Saeed said: “We will take to streets if the government does not withdraw this decision.”

Reform in the tax culture of Pakistan is something on top of the agenda of foreign donors backing the country’s bid for financial stability.

US Secretary of State Hillary Clinton has said a couple of times that “Pakistan should broaden the tax net before looking to foreign countries for assistance”.

Representative of International Monetary Fund (IMF) Adnan Mazari, who was recently in Islamabad to attend a development forum, said: “This GST has to be imposed, otherwise it will be difficult to extend future instalments of (an) agreed loan.”

The GST was first imposed in 1987 during the tenure of former premier Nawaz Sharif. However, there are quite a few industrial and other sectors, including traders, who manage to evade it by operating without proper invoicing.

(Awais Saleem can be contacted at ians.pakistan@gmail.com)