Industry fears VAT to affect tax collection

KARACHI: The industry fears that introduction of Value Added Tax (VAT) at this stage may disrupt growth in tax collection, and it may even prove counter-productive.

It is being argued that presently economy was not in a position to afford new jitters through experiments.

The industry feels that instead of introducing a new tax law, the scope of existing law be extended to untapped sectors.

SITE Association of Trade and Industry chairman Salim Parekh expressed concern over introduction of VAT Act.

He said that the prevailing sales tax act of 1990 was earlier introduced in VAT mode in 1996.

The SITE chief further stated that prior to introduction of sales tax, there was only single stage tax module in the country for GST and excise collection.

It was through Finance Bill 1996 that for the first time, Value Added Tax was introduced which means that VAT module already exists in the country.

He further explained that since it was a new act at that point of time, its scope was extended in different phases on various segments of business, whether manufacturing, exports, imports, wholesale, retail or services.

It is correct that diverse treatment had been given to different sectors of economy during the last decade, but one should not forget that present taxation system was implemented after careful study and keeping in mind the indigenous tax culture of the country.

He apprehended that the introduction of an altogether new act may disrupt growth in revenue collection and it might prove counter-productive.

Salim Parekh said that indirect tax collection had grown substantially during the last five years, and the government had won trust of the business community through business-friendly policies, particularly during the tenure of the previous government.

He also reminded the government that during previous government’s tenure, all stakeholders used to be taken on board before taking any decision on policy matters in tax law.

The SITE chief rejected the impression that distortion in sales tax regime had been caused by different special procedures.

On the contrary, he said these special procedures were meant to tax compliance through simplification and keeping in view the mind-set of both taxpayers and tax collectors.

FB Area Association of Trade and Industry chairman Shahid Ismail said that any new tax system initially disturbs smooth working of trade and industry, and it takes years for business community to understand and comply.

Therefore, he said at this stage when the economy is slow and trade and industry was facing numerous problems, the VAT mode of tax would cause new jitters. He suggested that instead of going for an altogether new tax law, scope of the existing law be extended to uptapped sectors.