LAHORE: Pakistan-China Joint Chamber of Commerce and Industry (PCJCCI) Executive Committee has recommended to revise Pakistan’s tax reforms on the pattern of Chinese taxation model by making necessary administrative changes.
PCJCCI President Faisal Afridi said attention should be paid to redesigning the tax recovery system. He along with Wang Zhai and Xiao gave a briefing on the proposed tax reforms roadmap based on the Chinese taxation model.
China made taxation central to the economic development agenda and community development goals, he said, adding that China had employed taxes as the principal means to transfer resources from private to public use. He regretted that the prevailing taxation system is a source of harassment for the business community and a way of corruption.
Referring to the Chinese model of taxation system, the PCJCCI president said, “China, the socialist state has fulfilled the needs of the society from cradle to grave. Child care, education, job placement, housing, subsistence, healthcare and elder care are largely provided and administered through state-owned enterprises.”
He said particularly the reform of value-added tax had boosted China’s services sector and change its position as the “world’s factory. Afridi said that value-added tax (VAT) reform was designed to replace business tax in manufacturing sector to protect the tax revenue of the local governments. Tax is a byproduct of growth and the government should concentrate on growth that would automatically increase taxes, he said. “For this, we need a new tax model.”
He said there is a need to create an optimal balance between a tax regime that is business- and investment-friendly, while at the same time, leveraging enough revenue for public service delivery (which, in turn, makes economies more attractive to investors).
The members also expressed that once equity and fairness in the tax system has been demonstrated by the state, enforcement, as well as compliance will dramatically improve. They said the increase in direct income tax from those who can afford to pay should pave the way for a significant reduction in reliance on indirect taxation of the poor and less affluent.