Tax increases on pharmaceutical inputs: ten multinationals to wind up business

The decision to increase one percent import duty on the import of raw material for drugs has forced some 10 multinational pharmaceutical companies to wind up business in Pakistan.
"With shifting of Rs 22 billion of export potential, the country would miss export targets for current fiscal year (2009-10) as investors of 10 multinational companies have decided to shift their investment," official sources at Pharma Bureau Pakistan told Business Recorder on Thursday.
As the Ministry of Finance (MoF) had imposed services tax on pharmaceutical companies and increased import duty up to one percent over the import of raw material, they decided to shift their businesses to other investment-friendly countries, the sources added.
They said the reason behind the decision was the worst increase in cost of production due to increase in withholding tax over import of pharma chemicals and imposition of services tax on industry. The multinational firms requested MoF and Federal Board of Revenue (FBR) to review its decision, but the government refused to pay heed to them, they added.
They informed that four multinational pharmaceutical firms namely Rosh Pharmaceuticals, Squibb Pharmaceuticals, Wyetch Pharmaceuticals and another company would stop their operations in first quarter of 2009-10. "While six other companies will shift their business in second half of current fiscal year that would reduce number of multinational pharma firms from 24 to 14," they added.
They warned if the government failed to withdraw its decision of imposing services tax on pharma products, then other pharma companies would also shift their investment to other parts of the world. The exports of the country would be affected with the shift, they said.
"On the other hand, local drug manufacturers have also decided to approach the government to record their protest against imposition of new taxes. The drug manufacturers would also record their protest against increase in petrol, diesel and electricity charges," officials of Pakistan Pharmaceutical Manufacturers Association (PPMA) informed. They said with the increase of cost of production due to increase in petrol, diesel and electricity charges, it would be difficult to continue manufacturing of drugs.
They were of the view that the government following the indication of the State Bank of Pakistan (SBP) regarding increase in inflation rate up to 24 percent, it should allow the manufacturers to increase drug prices up to 21 percent. They demanded of the government to link drug prices with Consumer Price Index (CPI) for rationalising prices of medicines.