TAX NEWS - JUNE 2010

Pakistan Tax: Value Added Tax (VAT) implementation definite after consensus

The Value Added Tax (VAT) would be definitely implemented but after the consensus is developed among all stakeholders, Advisor to Prime Minister on Finance and Economic Affairs said here on Friday. VAT would be implemented only after the provinces  are satisfied and consensus is developed, Dr. Hafeez Shaikh told mediamen after launching the Economic Survey of Pakistan 2009-10 here.

Shaikh clarified that Value Added Tax (VAT) was not any additional tax but the replacement of General Sales Tax (GST) adding that it would introduce uniform tax rate to remove distortions.

He said that General Sales Tax (GST) has been changed over the time and at present it applies rates from 16-25 percent on different commodities adding that the government wanted to remove the multiple rate system and introduce a uniform rate of tax under VAT mode of taxation.

He said that although it was government's commitment to International Monetary Fund (IMF) to introduce Value Added Tax (VAT) but stressed the need that the new mode of taxation should not be looked through IMF perspective.

However, being a sovereign country we must fulfill our commitment, Hafeez Shaikh added.

Secondly, he added, it was country's own need to bring reforms and improvements in the tax system and make it better to enhance the tax to GDP from single digit. "It is our resolve to reform this system," Hafeez Shaikh remarked.

He said under Value Added Tax (VAT), government also wanted to simplify the tax procedures besides facilitate the tax payers while under this mode of taxation threshold would be 7.5 million against the 5 million under the old system of General Sales Tax (GST). 

The Advisor to Prime Minister clarified that Value Added Tax (VAT) would not be implemented on education, health and edible items.