KARACHI: The private sector has urged the tax machinery to reduce corporate tax rate to 30 percent in budget 2014-2015 for attracting investments in the sector and to enable country to be internationally more competitive.
It is suggested that tax rate should be uniform for corporate and other sectors which would eliminate gap between the corporate organizations and others would provide equal opportunity to all sectors to be competitive.
In the previous budget, the lowering of the corporate tax rate by one percent to 34 percent, in the Finance act 2013-14 and further proposed reduction up to 30 percent announced by the Finance Minister in his last year’s budget speech had been greatly appreciated.
It is envisaged that corporate sector growth will generate extra revenue contribution to the government of Pakistan and promote documentation.
As the corporate tax rate in Pakistan is at 34 percent which is higher than almost all the Asian countries, it said.
It is also highlighted that in addition to direct corporate taxes, companies also pay other levies like the Workers Profit Participation Fund (WPPF), Workers Welfare Fund (WWF), Sindh Development and maintenance of Infrastructure (SDMI) and stamp duty on purchase orders and contracts, that leads to additional tax burdens or increase in cost of doing business.
The discrimination has been witnessed between the Association of Persons (AOP’s) and small companies who are enjoy benefit of lower documentation compared to large companies.
The increased tax rate discourages the corporaization of the economy and these entities are also not subjected to detailed scrutiny by Federal Board of Revenue as in the case of large companies, falling under the Large Taxpayers Unit, who are sometimes subjected to multiple audits.
Due to the current scenario, foreign and local investors have no incentives to form companies due to higher and varied rate of taxes.