Call to reform tax system

Call to reform tax system

ISLAMABAD, MAR 10 (DNA) — The Ferozepur Road Industrial Association (FRIA) has warned the high cost of doing business has been hurting the economic growth, as the inflation rate bounced back, hurting the trade and industry the most, who faced the brunt of a staggering increase in gas prices. The FRIA senior vice chairman Shahbaz Aslam said that the failure to reform the tax system is a major factor behind heavy domestic and foreign borrowings by the government.

Shahbaz Aslam said that the most serious threat to the economy in the current fiscal year would be inflation, because it is already hitting economy due to continuous raise in oil prices and depreciation of local currency. Quoting the Pakistan Bureau of Statistics, he said that the Consumer Price Index surged to 29.2 percent last month compared to a year ago.  The increase was more than market expectations and has lessened the prospects for a cut in the interest rates, which stand at the country’s highest ever level of 22 percent.

This reading, the first announced by the PBS after the recently concluded International Monetary Fund talks, in which the global lender also cut the inflation forecast for Pakistan to 22.8 percent, may strengthen the IMF’s view of keeping the policy rate unchanged until core inflation starts easing out.

 He predicted that inflation would remain high and may even increase further due to market frictions caused by relative demand and supply gap of essential items, exchange rate depreciation and recent upward adjustment of administered prices of petrol and diesel.

The PIAF and FRIA leader called for keeping check on government expenditure and high cost of debt servicing to contain budget deficit, as the Pakistan’s federal budget deficit projection has been revised to history’s highest to over Rs6 trillion, highlighting the unending fiscal woes that have pushed the country into a debt trap despite putting additional burden of billions of rupees on industry in the current fiscal year.

Expressing serious concern over the high jump in country’s budget deficit, FRIA SVC said the revision has been made in light of agreement with the International Monetary Fund, which exposed the massive underreporting of expenditures at the time of budget presentation by the finance ministry.

This is a highly unsustainable level and has already pushed the country into a situation where debt restructuring seems to be the only viable option. The PIAF EC member maintained that the failure to reform the tax system and increase revenue collection is a major factor behind heavy domestic and foreign borrowings by the government. — DNA