Is VAT always a good tax? Bilal Hassan Rapid spread of VAT (value-added tax) across the globe signifies that it may be a good tax. However, VAT can be problematic when the economy has a large informal sector. The basic concept behind the levy of this consumption tax was that the legal incidence of VAT would be on sellers, including …

Think Availing the Tax Amnesty No place to hide! Bilal Hassan In view of a largely undocumented economy, the government has introduced a tax amnesty to enable all citizens of Pakistan, except public office holders and their dependents, to declare their undeclared assets and incomes. Under this amnesty, taxable persons may declare benami assets, foreign liquid assets, bank accounts, undisclosed …

Sources Attributable to the Sales Tax Gap Bilal Hassan In Pakistan, people prefer to make business transactions in cash rather than through banking channels. Only 13 percent Pakistani nationals have formal bank accounts as compared to 83 percent people in Sri Lanka, 53 percent in India, 31 percent in Bangladesh and 92 percent in Iran, according to the JCR-VIS sector update …

Zeroing in on Benami transactions In Pakistan, the Benami Transactions (Prohibition) Act, 2017 (Benami Law) was gazetted on 17 February 2017. The Benami Law became effective with the publication of the Benami Transactions (Prohibition) Rules 2009 vide SRO 326(I)/2019 dated 11 March 2019. The Benami Law prohibits a person from entering into a benami transaction, which is defined as: a …

Tax to GDP ratio projected from 15% to 20% In the recent past, massive changes have been introduced to the taxation regime. To ensure exchange of information in tax matters so as to prevent evasion and avoidance of tax through cross-border trade and financial transactions, Pakistan signed OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCA) on 14th …

A must for making GST regime effective and efficient Share of GST regime in overall federal tax receipts is more than 40 percent. However, this is riddled with many deviations from standard GST/VAT systems that are adversely affecting its effectiveness. Resultantly, revenue efficiency is comparably low. An important deviation in this context is the use of multiple rates of sales …

A must to attract investment in Pakistan To boost economic growth, to reduce unemployment rate and to keep inflation rate low: these are the three primary goals every government aspires to achieve and works for that vigorously. Pakistan’s current rates of economic growth are not encouraging. In 2006-07, GDP growth was 7 percent, but it fell to 2.4 percent in …

Ease of Doing Business Index (EDBI) measures different aspects of business regulation, including commencing business activity, obtaining construction permits, getting electricity connections, registering property, accessing finances, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving solvency and regulating labour market, which are of utmost importance for the entrepreneurship as well as for enhancing business activity in any jurisdiction. As …

Being relatively less distortionary, direct taxes tend to accelerate economic growth, provided the tax base is broad enough to ensure equitable sharing of tax burden by the economic agents. Voluntary tax compliance (VTC) is considered more efficient and cost-effective method of revenue collection through direct taxes. This could be an immediate explanation why the tax authorities in the modern economies …

An imperative to reducing tax evasion To pay debt servicing charges of $7.479 billion (principal amount of debt $5.186 billion plus interest amount of $2.293 billion) for the fiscal year 2018, the government is in dire need of funds. Therefore, to meet its obligations and to finance budget of Rs 5,103.8 billion during 2018-19, the government will be searching new …