A meeting of the managing committee of Union of Small and Medium Enterprises (Unisame) was held at Unisame House to consider the question of which is a small or medium enterprise. In this connection, a talk was given by Zulfikar Thaver, president of Unisame.
He said that a large entrepreneur is not a small or medium enterprise as also a micro enterprise.
A large enterprise can be distinguished from the fact that it comes under the large taxpayers unit and the micro is one who has no tax registration, and its income is below taxable limit.
He said that a small or medium enterprise, to come under the fold of SME, must have an address, a bank account and a tax registration number.
The State Bank of Pakistan has defined SMEs in the prudential regulations and it is the endeavour of the Unisame to place before the members all the definitions given by all the different stakeholders and adopt the most suitable and the most appropriate one.
SMEs have been defined by various agencies on the basis of capital, turnover, number of persons employed, and the Union has suggested to the government to determine the question on the basis of income tax paid by the entrepreneur because this will make it easy for the authorities to get an inventory of the SMEs straightaway and work can begin on other aspects.
The question is: what if a SME makes a loss or profit which is not taxable; will the SME become micro or, if his profits exceed and he enters the large tax payers unit, will he change his status; and what if in the following year there is again an increase or decrease in profit, will the status keep changing? The answer is: yes, because it is a change in status and needs to be accepted as such.
Unisame is taking up this issue with the Small & Medium Development Authority (Smeda) as this can resolve once and for all the difficult task of defining a SME and the best part is this that there would be no objections or fears because if the entrepreneur is paying taxes he is on record and enjoys the status of a tax payer and if he is not a tax payer he is a micro and exempted by virtue of the fact that income is below taxable.
He said Unisame has received many requests from its members & volunteers from all over Pakistan to settle the issue of definition of SME because seven different government agencies are defining SMEs differently and this is causing problems and banks & DFIs are also at a loss to consider request of trade organisations
He said Unisame has requested SBP to prevail upon the banks & DFIs to finance SMEs on cash flow basis and simultaneously educate the banks assess whether the entity is operating as a cash flow positive or a negative company and decline finance if negative.
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