LAHORE: Transactions against fake identity cards make it difficult for the government’s negotiators to argue with the Financial Action Task Force (FATF), Federal Board of Revenue (FBR) chairman Dr Muhammad Ashfaq said on Sunday.

He said cases related to Rs3.5 trillion taxes would soon be disposed of as the judiciary has promised to resolve this issue ‘out of the way’.

“It becomes difficult to argue with the international community when business on such a large scale is done against fake CNICs. This situation complicates issues with the Financial Action Task Force (FATF),” the FBR chief said while speaking to the business community here at the Lahore Chamber of Commerce and Industry (LCCI) on Sunday.

“There shouldn’t be an issue with the purchaser to give a copy of his CNIC while buying products worth Rs100,000 and above,” he added.

Chairman says judiciary has promised to dispose of Rs3.5 trillion tax cases

Talking about court cases, Mr Ashfaq termed it the most important issue and said he had meetings with the honourable judges, including Islamabad High Court Chief Justice. “During meetings, I told them that the cases related to taxes worth Rs3.5 trillion are stuck in the courts that must be disposed of. I was assured that all such cases would be resolved within a short time out of the way. A special bench has also been constituted in Islamabad,” he said.

The chairman was of the view that the country was in a dire need to bridge the gap between tax and expenses to GDP, as this situation was forcing it to go for loans from the IMF and other institutions. “Our tax-to-GDP ratio is about 12 per cent while expense to GDP is 20 per cent. To bridge the gap, we get loans that are to be eventually paid by us or coming generations. Therefore, we will have to change our lifestyle and culture by paying taxes,” he said.

He said withholding tax was always applied on income internationally, but, in Pakistan, it was also being charged on bank transactions. This is because people don’t pay taxes. “We will gradually end this practice with the strengthening of the income tax system,” Mr Ashfaq maintained.

He told the business community that more tax exemptions would be withdrawn soon while the sales tax rate would be rationalised within one or two years. He claimed that the FBR’s refund system was one of the best in the world and ST refunds were being cleared in 72 hours. He said the withholding tax would be rationalised in the upcoming budget.

Speaking on the occasion, the LCCI President Mian Nauman Kabir said various taxation measures taken in the Finance Supplementary Act 2022 would have an adverse impact on the growth of economy & industry.

He said the sales tax exemptions on imported machinery had been withdrawn which would ultimately hit SMEs and exports.

“The cost of doing business in the recent times has increased tremendously. To bring the cost of doing business down, we need to diversify our energy mix to cut the cost of electricity production by increasing the share of renewable energy, particularly solar. The measure of abolishing sales tax exemption on import of solar panels and renewable energy equipment can prove to be a big obstacle in achieving the objective of making our energy mix more cost effective,” he explained.

Published in Dawn, March 14th, 2022