Tax policies encouraging businesses to join informal sector - Press Release issued by Atif Ikram Sheikh.

Islamabad -- May 28, 2023 (PPI-OT)

Following is the text of press release issued by Atif Ikram Sheikh

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Former Vice President of FPCCI Atif Ikram Sheikh on Sunday said the tax-to-GDP ratio is below 10 percent in Pakistan which is below the level required for any proper economic growth. There have been no serious efforts to expand the tax base and tax machinery relief on increasing collection through indirect taxes and burdening taxpayers which has never worked, he said.

Atif Ikram Sheikh who has also served as President of ICCI and Chairman of PVMA said in a statement issued here today that over-reliance on imports and turning businesses into withholding agents was a policy which was not supposed to work from the very beginning and it encouraged many businesses to move from formal to informal economy.

The concept of higher taxes on non-filers persuaded businesses to remain outside the tax net and pay a higher tax in the shape of withholding tax in order to escape documentation and scrutiny by taxmen, he noted. The business leader said that businesses absorbed the higher tax in their cost of doing business and priced their products accordingly which also increase the cash in circulation.

He observed that the government is still not learning from its mistakes and the focus continues on extracting more tax from the existing tax base which will shrink the base even further. There are plans for imposing taxes on banking transactions which have not worked in the past, he said, adding that the tax burden is tilted towards the documented manufacturing sector.

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