Learning from India: PBC recommends steps for tax base expansion

May 20, 2024 (MLN): To broaden the tax base and increase contribution of the undocumented sector to tax collection in Pakistan, The Pakistan Business Council (PBC), in a letter to Finance Minister Muhammad Aurangzeb has recommended to implement steps taken by Indian government.

PBC noted steps taken by Indian Government for documentation of economy, which included Digital Wallets—Mobile wallet apps like Paytm, Google Pay, and others—that are widely used for digital payments, including transactions with street vendors.

In Pakistan, majority of retailers/street vendors are not accepting payment through debit/credit cards, the country’s largest business policy advocacy platform stated in the letter, a copy of which is available with Mettis Global News.

It urged the government to consider implementing the steps taken by Indian Government, stressing that digital wallets offer convenience and security, making them popular among consumers and vendors alike.

This can be done through partnerships with payment service providers to facilitate digital payments.

This includes providing vendors with POS (Point of Sale) devices, QR code stickers, and training on using digital payment methods.

Moreover, PBC said that as per the Islamabad Capital Territory Ordinance, rate of sales on services rendered by restaurants in Islamabad is reduced by 5% in case payment is made through credit card.

“Similar law should be applied for goods and rate of sales tax be reduced to 13% (from 18%) in case of payment through credit cards,” it said.

This will encourage customers to force suppliers to accept payment through credit cards, PBC added.

PBC warned that there is a serious discrepancy between the number of Income tax & sales tax filers and non-filers.

As of June 30, 2023, there were 177 million bank accounts in Pakistan, it said, citing media reports.

There are more than 4m industrial and commercial utility connections, however, registered sales tax Filers are around 200,000.

Out of these 200,000 only around 41,000 are making payments along with their monthly sales tax returns, PBC highlighted.

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