Taxation Trends in Pak in the Need for Reforms

The following write-up was published in the Jan-Mar 2018 Quarterly Edition of “Policy Insights”, the largest global accountancy body ACCA’s regional publication covering MENASA

Link: ACCA’s Policy Insights’ Published Link

Link: Main Page

Fiscal Reform: Taxation Trends in Pak in the Need for Reforms

By: Omer Zaheer Meer

Taxation laws are set of laws to derive revenues for the Government to function & service the citizens with the aim of improving their quality of life while continuously improving the facilities and infrastructures provided. Pakistan has a complex taxation system with a focus on indirect taxes with over 70 different taxes. This has led to several sets of laws dealing with specific taxation areas. Below are some major issues highlighted in need for major fiscal reforms:

  • Extremely Low Numbers of Income Tax Returns Filers:

From approximately 1.32 million income tax returns filers in tax year 2016 to fewer than 1.3 million as per last available data in 2017 is an area of major concern. In a country of over 220 million, this amounts to just 0.6% of the total population.

  • Undocumented, Black economy:

This builds up from the above issue of low return filers. A larger proportion of the economy, some estimates put the number close to 100% of the GDP. This by any standard is massive and a point of major concern.

  • Taxation Complexities and Ease of Doing Business:

As mentioned above, Pakistan has a very complex tax system and the recently released data by the World Bank has placed the country on a ranking of 147 out of 190. The complex, non-harmonized and multi-layered laws in operations not only make it more expensive but also time-consuming for the businesses.

  • Harmonization Issues:

The issue of lack of harmonization among various laws increased many-fold post the devolution of Sales Tax on Services regulation and administration to the provinces and each Province setting up its own Revenue Authority for the same. In an era, when countries are agreeing to facilitating arrangements on the likes of European Economic Area, making borders irrelevant in terms of economic activities, Pakistani businesses are facing the traditional challenges while expanding their businesses in other provinces within the same country.

  • High Costs of taxation:

In addition to having one of the most complex taxation systems in the world, Pakistan also has high taxation rates compared to other countries in the region. Furthermore the taxation rates are also several times that of the cost of tax avoidance in the country, making it an attractive proposition for some businesses to keep operating beyond the radar of the legal economy. Moreover, the highly complex nature of the taxation regimes also translates into further costs for taxpayers in terms of the time and administration required to ensure compliance.

  • Structural Issues:

The structural issues including confusing and highly subjective laws, focus on indirect taxes, the improvable systems, mal-practices, singular focus on revenue collection, harassment of the existing taxpayers rather than using the same resources to focus on expanding the tax base and a general ill-perception have all contributed to the current state of affairs and needs to be reformed if the situation is to improve.

  • Conclusion:

The above issues are requiring serious efforts to address the critical issues concerning the taxpayers particularly the businesses in the country. With CPEC and its associated possibilities materializing, now is a good time to ensure these reforms are put to action to achieve the full potential of not only the existing economy but also the developments accruing. We’ll discuss the possible proposals for reforms in the next issue. Till then, we leave our readers to ponder over these issues.

 

The writer is a leading economist who is also a qualified chartered certified accountant, chartered financial analyst and anti-money laundering expert. He’s sits on the Global Tax Forum of ACCA and is the sitting Chairman Liaison Committee of LTBA and ACCA’s Taxation Committee in Pakistan. He can be reached on Twitter and www.myMFB.com @OmerZaheerMeer or omerzaheermeer@hotmail.co.uk

Recognising our regular contributors…
Nayeema Bashar receives a certificate of appreciation and Omer Zaheer Meer wins Pakistan’s national Member Advocacy Award.

 

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ACCA publishes detailed report on MLCC

Dear Readers,

Peace be on you,

It is with pleasure that we share that ACCA, the largest accountancy body in the world recently published a detailed report on our firm Millennium Law & Corporate Company (MLCC) and recognized it as the pioneer ACCA practicing firm in Pak. You can directly access it at: ACCA’s published profile of MLCC

or continue to read below and let us know your valuable views.

Millennium Law and Corporate Company (MLCC) becomes the Pioneer ACCA practicing firm in Pakistan

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Profile of Millennium Law & Corporate Company

  • 30 + Years’ “Young”

Millennium Law & Corporate Company (MLCC) has a background of thirty (30) years plus history of professional excellence stemming from its parent practice. It used to be focused solely on legal practice including corporate matters.

  • Way Forward – One stop solution

MLCC was expanded to include a new division for providing ACCA centered services. This led to the inclusion of the areas of taxation, corporate services, internal audit, advisory, risk management and trainings in addition to the other legal matters within the services offered by MLCC.

  • Partners

The firm is setup with specialized teams dealing with relevant areas under four (4) partners, two of whom are ACCA members while one is an ex legal advisor Federal Land Commission (Government of Pakistan) and another is an ex deputy Attorney General of Pakistan.

  • Pioneer ACCA Practising Firm in Pakistan

In 2015, the Association of Chartered Certified Accountants (ACCA) took a giant leap in Pakistan and initiated practising license program for the country.

  • MLCC became the pioneer practising firm in Pakistan with
  • Omer Zaheer Meer FCCA (the managing partner of MLCC) being awarded the first ever ACCA practising license in Pakistan.

Before that history was made when:

  • Omer Zaheer Meer FCCA became the first ever ACCA member to get admitted to the prestigious Lahore Tax Bar Association (LTBA) during 2009/10.
  • He was later joined by his brother Mr. Ali Zaheer Meer ACCA who is now a partner at MLCC and another ACCA member at LTBA.

Millennium Law & Corporate Company has built a reputation for quality services based on value creation and issue resolutions with time-specified deliverables. It is now the premier ACCA practising firm in the country and one of the leaders in the taxation, advisory and corporate services sectors.

  • Distinguished Collaborations

MLCC through its partners is currently represented at the Taxation Committee of Lahore Chamber of Commerce and Industry, Chairing the Liaison and sitting on the publication committees of LTBA, Chairing the Taxation Committee of ACCA, Global Tax Forum of ACCA and several think-tanks including Hamdard Thinkers’ Forum and Millat Thinkers’ Forum. MLCC’s clientele also includes some of the most distinguished names. Out key clients and/or associations are as below:

Read the rest of this section directly at:  ACCA’s published profile of MLCC

 

Why was MLCC started?

Managing Partner’s Views:

It is my strong and educated belief that the ACCA qualification and a proper training program equips one with the relevant skills, education and expertise to be the best not just technically but on the value addition side of being an entrepreneur.

With an early start to my career resulting is sufficient experience, I felt it was the right time to launch an ACCA practising firm on my return from UK to Pakistan. Also it was an opportunity to contribute back to the profession and ACCA fraternity in several ways.

However ACCA did not have a local practising license back then. Nevertheless we upheld the brand ACCA and pioneered in an area deemed alien for ACCA members at the time, i.e. local taxation. Within a short span of time we stood out of the crowd delivering excellence and quality beyond norms of the market. We then started expanding into other areas such as corporate services, advisory, risk management, e.t.c. with equally good results.

The milestones so far

Since becoming the pioneer ACCA practising firm in Pakistan some of the major milestones achieved by MLCC are outlined below:

  • Establishment of our non-legal services headquarter at the prime location of Bashir Mansion, 2 Turner Road, Lahore which is opposite FBR, close to Appellate Tribunal, behind Lahore High Court, adjacent AG Office and practically in the hub of all the action.
  • Establishment of a branch office in DHA, Lahore for facilitation of our clientele from the posh areas.
  • Award of the practising license and hence becoming the pioneer ACCA practising firm in Pakistan
  • Joining of Mr. Ali Zaheer Meer as the second ACCA partner of the Firm
  • Expansion intro value addition areas beyond taxation including internal audit, advisory, risk management, corporate services, e.t.c.
  • Start of our training division
  • Partnership with ACCA Pakistan for the CPD trainings of ACCA fraternity and beyond
  • Attendance of our CPD programs and training events by high-profile professionals including owners, directors and even non-ACCA partners of other renowned firms
  • Publication and launch of a research study on indirect taxation across the MESA (Middle-East and South-Asia region) in collaboration with ACCA and EY
  • Working with top names in various sectors including the likes of National Bank of Pakistan, Habib Bank Limited, MPDD, ACCA, LCCI, KCCI, LTBA, e.t.c.
  • Pre-launch of our ACCA trainees induction program

Advantages and benefits of ACCA firms

ACCA firms offer several benefits for the ACCA fraternity, the business community and the society at large. Some of the major ones include:

  • Opening up of new horizons and opportunities
  • Jobs creation
  • Quality services
  • Greater acceptance of ACCA locally
  • Entrepreneurial rewards
  • Increased collaborations with worthy partners
  • Greater exposure

With the advent of CPEC and the corresponding developments, there is a lot of potential for quality accountants and firms offering the right services. Yes it will be challenging but the rewards are more than commensurate. So have a dream and turn it into a reality.