LAHORE: The Lahore Chamber of Commerce & Industry (LCCI) on Saturday publicised its proposals for the federal budget 2022-23 at a press conference on Saturday.
LCCI President Mian Nauman Kabir presented the budget proposals while Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq also spoke on the occasion.
Mian Nauman Kabir said that the private sector is the engine of growth and its proposals must be the part of federal budget 2022-23. He said that in developing countries, the private sector generates 90 percent of jobs, funds 60 percent of all investments and provides more than 80 percent of government revenues. In this regard, feedback from the private sector plays a fundamental role in formulating appropriate policies for the trade, industry and economy. The robust linkage between the Government and private sector boosts the economy, creates the friendly environment, generates employment, attracts investment and helps in the growth of SME sector.
“All the political parties should sign a charter of economy and follow a single economic policy that should be evolved in consultation with the stakeholders,” the LCCI President added.
He said that being premier Chamber of the country, the Lahore Chamber of Commerce & Industry has formed a set of proposals for the Federal Budget 2022-23, which is a composition of the issues being faced by the business community and recommendations for their best possible solution.
Mian Nauman Kabir said that Pakistan’s tax base is narrow. Out of total population of 220 million only around 3 million people are filing their income tax returns. It is proposed that all the persons having industrial or commercial electricity or gas connections should be brought into the tax net. Similarly, all the person borne on Income Tax roll, if liable to be registered under Sales Tax Act 1990, should also be registered for the purposes of Sales Tax. A broad base will increase the revenue and help in reducing the burden of the existing taxpayers.
The LCCI President said that to remove uncertainty among businesses and for sustainable growth, there should be consistency in economic policies (both Macro-economic and Sector Specific). For example, taxation through mini budget and changes through SROs negate the consistency & predictability of policies, which hurt the investment, exports, manufacturing, business community as well as end consumers.
He said that SMEs are backbone of the industry. There are up to 5.2 million SMEs in Pakistan with 25 percent share in exports and 30 percent contribution in GDP. Considering the vital role of SMEs, it is proposed that the turnover threshold for definition of SMEs may be enhanced to eight hundred million rupees net of Sales Tax, FED and discounts.
Mian Nauman Kabir said as regard Tier I Retailers, it is proposed that condition of area specification may be removed, declared one shop retailer exempt from POS integration and consumption of electricity units may be used as a parameter instead of cost of electricity. Further, for retailers operating in air conditioned mall, plaza or centre, area of 500 square feet or more may be specified.
He said that Customs Tariff Rationalisation is need of the hour. To protect and promote local industry and for import substitution custom duties on import of raw material may be reduced to minimum or zero percent. Similarly, import of finished products and luxury goods may be discouraged through levy or enhancing the regulatory duties.
The LCCI President said that FBR granted Sales Tax and Income Tax exemptions to industries based in erstwhile FATA/ PATA in 2018 on imports of certain raw materials for their consumption under SROs 889(I)/2018, 890(I)/2018 and 1213(I)/2018. Further, exemption of FED has also been granted to the industries based in erstwhile FATA/ PATA w.e.f 1st July 2021. These raw materials are imported and sold in Punjab which results in heavy Tax Evasion. This misuse is seriously hurting the regular industries based outside FATA/ PATA especially the Foam Industry and Steel Melters etc. This matter requires immediate attention to address the problem.
He said that production of various steel products is determined at a uniform rate without considering the ground realities. It is proposed that per ton production of steel products should be determined on the basis of consumption of 800 kwh of electricity for small steel furnaces having capacity of 5-10 tons of production so that they may survive.
Mian Nauman Kabir said that the imposition of 17 percent Sales Tax through Finance Supplementary Act 2022 (Mini Budget) on items like capital goods, plant, machinery and equipment, raw material (EPZs have also not been spared) Effluent Treatment Plants (ETPs), Renewable Energy (Solar, Wind, and Geothermal) equipment, health care products, hybrid seeds, bovine semen, animal and fish feed, Flavoured milk, yogurt, cheese, butter, cream, Desi ghee, whey, milk and cream, ingredients of poultry feed and other agricultural products caused inflation, have increased cost of doing business, compromised ease of doing business and increased cost of goods for end consumers. It is proposed to rationalize the tax rates.
He said that Chambers of Commerce & Industry fulfil all the criteria prescribed for a charitable organization and are providing services to the business community for promotion of trade and industry. This position has also been accepted by ATIR. FBR is requested that Chambers of Commerce & Industry, be included in Sub clause (1) of Clause 66 of part I of Second Schedule to Income Tax Ordinance, 2001 for Exemption of Total Income.
Mian Nauman Kabir added that the Energy Mix should be made more sustainable and cost-effective by reducing the reliance on imported Oil for electricity production and increasing the share of Hydro Power and Renewable Energy (Wind, Solar, Biomass etc). For the promotion of solar sector, the duties and taxes on solar equipment must be reduced to zero. The Electricity tariff for all the sectors should be reduced through elimination of taxes. The Gas Tariff should also be reduced for the industry.
He said that in order to reduce cost of doing business and give relief to consumers the current policy rate of 12.25 percent must be reduced to 5 percent in line with the regional economies. The regional interest rates are (India 4 percent, Bangladesh 4.75 percent, China 3.85 percent, and Sri Lanka 5 percent).
Mian Nauman Kabir said that tax laws, procedures and returns should be simplified. One page return form should be introduced. There should be a single Audit for Sales Tax, Income Tax and Withholding Tax. The frequency of this single Audit should be reduced to once in 3 years. Discretionary powers under Section 138, 175, 177, 214C of Income Tax Ordinance 2001 and 25, 37, 38A, 40, 40B, and 48 of Sales Tax Act 1990 should be minimized in consultation with stakeholders. To reduce the cost of doing business, Government should reduce the rate of Withholding Tax. Since most of the Businesses operate on very low profit margins, withholding tax rate of 4.5 percent should be brought down between 1 percent and 0 percent to make sure that businesses do not face liquidity problems. To remove hardships of tax payers, stay order granted by the Inland Revenue Appellate Tribunal should be remain valid till disposal of the appeals.
The LCCI Senior Vice President Mian Rehman Aziz Chan said that to promote conducive business environment rate of sales tax should be brought down. He said that minimum tax should be reduced form 1.25 percent to 0.5 percent. Income Tax deducted under various provisions of law may be made adjustable tax instead of treating the same as minimum tax.
LCCI Vice President Haris Ateeq said that for the growth of industry and enhancing exports, Tax collected on imports of raw material u/s 148 of income Tax Ordinance 2001 by manufacturers cum exporters should be 0 percent. To boost the exports of leather sector raw hides and skins must be included in the definition of Agriculture Income. Income Tax Refunds should be processed speedily through automated system on the pattern of Sales Tax Refunds.
LCCI office-bearers said that the condition of disclosing CNIC for sale to unregistered persons should be abolished in the larger interest of small businesses in the country in these challenging economic times. Many members of Business Community have reported that they receive notices for imposition of fines, penalties and for recovering taxes. It is causing serious problems for the business community. Fines and penalties should not be made source of revenue. This practice should be stopped immediately. Further, for posting of the officers at business premises and in the exercise of issuance of the recovery notices, business community must be taken on board.
Copyright Business Recorder, 2022
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