The problems of trade imbalance, poverty, unemployment and inflationary trend have primarily arisen due to substantial real decline in small and medium sized industries. ICAP president and partner AF Ferguson & Co S.M. Shabbar Zaidi, speaking at a post-budget seminar, said there had been substantial increase in volume of trade versus industrial production.
"The argument of the WTO, etc, are raised to project and protect the trading sector. In my view the issue is import substitution. I call it 'reverse exports'," he added. There had been complete focus on promotion of exports; however, there had never been a serious economic study on the matter of import substitution.
"Unless the issue of import substitution is taken as a subject, real economic issues can not be tackled. This includes the issue of cost of doing business, availability of finances, honeymoon for certain sectors such as real estate and stock markets, etc," Zaidi observed.
He further said the important aspect to be examined was whether or not there were certain fiscal incentives or loopholes in the taxation system, which promoted trade versus industries and added there were many at present.
"Unless the government curb these loopholes, any future real growth in economy can not be achieved. Agenda for future should be "import substitution".
About the federal budget, he said there was a projected increase of 17 percent, which was quite reasonable. However, the ratio of direct to indirect taxes needs to be improved; otherwise the principle objective of equitable distribution of wealth can not be achieved.
Another important aspect to be analysed was whether there had been incidence of indirect taxes on essential items.
"There has been reasonable improvement in tax collection; however, our tax policy is going through compositional crises, which are direct versus indirect taxes, incidence n corporate versus non-corporate sector and geographical imbalance," he said.
Unless and until there was a serious effort to undermine these imbalances a sustained increase in taxation revenue could not be achieved. There had been efforts at improving the situation, however, substantial efforts are still required.
"Now defence expenditure is Rs 250 billion whereas development budget is Rs 415 billion. This is the result of positive thinking, framing fiscal laws with economic rationale and adoption of international best practices. However, we should not be complacent. We have yet to bridge a wide gap," Shabbar Zaidi concluded.
Masud Ali Naqvi, KPMG senior partner Taseer Hadi and Company spoke on the "macro economics aspect of budget".
Speakers expressed astonishment at the introduction of the concept of disallowance of input tax if the tax, so claimed, was not paid by the supplier. Within the overall context of collection of tax by the exchequer and the claim of input tax, the concept seemed to be correct, however, there were practical lacuna in the implementation of this section, they added.
Ebrahim Siddat, partner Ford Rhodes Sidat Haider & Company speaking on the "direct tax in the budget", opposed the six percent levy on the services.
Chief guest regional tax commissioner Ibrar Ahmed termed the federal budget 2006-07 a balanced one.
Regarding income tax on salaried class, he said new tax provisions were beneficial for the salaried people, however, there were some negative impacts on the people having earning ranging from Rs 0.4 to 2 million per annum and assured there would be working on the issue and no one would be left to suffer.
Ibrar Ahmed said the CBR was very receptive regarding relief to the people and claimed wherever there was any demand or requirement for relief, it was given. He maintained there was a long demand of brining down tax rates, which had been entertained. He said the tax net was being extended, as this would reduce the burden from the taxpayers.
ICAP president (southern committee) presented the vote of thanks.
Comments
Comments are closed.