Islamabad Chamber of Commerce & Industry has called upon the government to take measures for developing business and investment friendly tax structure as the existing tax structure discourages investment and encourages rent seeking. 

 

Muhammad Ali Mirza, Acting President, Islamabad Chamber of Commerce & Industry said that investment friendly tax system would help in better economic growth of the country, but unfortunately, the prevailing tax system promotes rent-seeking and discourages entrepreneurship as it imposes heavy taxes on business profits. 

 

He said if a prospective entrepreneur plans to start a business, invests capital, uses time and energy to pursue a business venture and is able to earn profit, the government imposes up to 33 percent tax on his business income, but if a risk-averse person invests his capital in interest-bearing government certificates/deposits, only 10 percent tax is levied on his interest income. The result is that people prefer to invest money in risk-free government securities instead of starting business ventures. 

 

Muhammad Ali Mirza said that government should focus on reducing tax rates and expand tax base by bringing all exempted sectors into the tax net. He said tax system should be so designed that it should give an attraction to people to invest in business ventures. He said government should also seriously consider introducing mandatory trade license scheme for every trade which will help in documenting the economy and promoting better tax revenue. 

 

Highlighting anomalies in current tax system, he said if a business venture pays out its excess profits as dividend, the dividend is taxed at @ 10 percent in spite of the fact that the income on which the dividends are paid is already taxed at @ 33 percent. He said such anti-business tax system should be replaced with a business friendly tax structure. 

 

He was of the view that the entrepreneurship and investment promoting tax structure would create multiple benefits for the economy as it would encourage innovation, entrepreneurship, facilitate skills development and would ultimately make Pakistan an attractive destination for local and foreign investors.