SHAFAQNA PAKISTAN (Shia News Agency)
Multinational companies increase a government’s reliance on value-added taxes or GST (VATs, which are viewed by many as regressive) and reduce government tax receipts that can be used to fund education, expand health care, combat poverty, invest in infrastructure, and otherwise contribute to the nation’s economic development. Pakistan government gave tax incentives, pro rich tax exemptions alone reduced tax collected by an amount equivalent to 23% of total government revenue, PKR 600 billion and in a last decade the amount was calculated 1500 billion according to Oxfam study “ Abolish the pro rich tax exemptions for right to life”. Yet these concessions account for only a portion of lost potential revenue. The use of inflated transfer pricing arrangements and royalty and management fees further reduce government tax receipts. Which needs to further investigates how much the quantum of state revenues lost due to tax avoidance practices.
In emerging markets like Pakistan, MNCs often negotiate tax concessions with the national government, utilize special economic zones (SEZs) and adopt royalty and fee structures that result in tax payments incommensurate with a company’s operational activity. These tax strategies minimize a company’s corporate tax burden, but they also undermine national development by eroding a country’s tax base, an issue that should be of particular concern for companies and investors with an economic interest in the growth of an emerging market consumer class. Preventing aggressive corporate tax practices and mitigating the related risks will require action on the part of governments, regulators and companies themselves. It should be taken into account because Pakistan economy is already suffering from heavy shocks.
pakistan.shafaqna.com
