The American Business Council (ABC) greatly appreciates government efforts to involve all chambers and business forums in the budget preparation process. In March this year, ABC had submitted its proposals to CBR and was invited in April by chairman CBR and his team for a detailed presentation. ABC also had the opportunity to discuss its proposals with the federal ministers and advisor to PM on finance, who were positive and receptive.
As part of the fiscal reforms, enactment of the new Federal Excise Act is a very positive move and it creates transparency in the system and helps facilitate compliance. ABC congratulates the removal of CED on two categories - detergents and soaps - which will result in benefit to end-consumers as well as help curb inflation.
Reduction of the highest income tax rates from 35 percent to 30 percent is very encouraging as it provides relief to the salaried class. However, the benefit has been reduced by abolishing the previously allowed tax reductions. To further simplify the process for the computation of tax on perquisites and allowances, ABC had recommended a unified standard tax rate to be applied.
Exemption granted to insurance companies in respect of capital gains tax will attract investment. Exemption of presumptive taxation for large trading companies is encouraging and will attract foreign investment. However, ABC had proposed merger of income of existing trading and manufacturing companies for tax assessment purposes.
Also to attract foreign investment, ABC had proposed reduction in corporate tax rate since Pakistan has one of the highest tax rates in the region. This recommendation needs reconsideration before the budget is passed and becomes the finance act.
The other ABC proposals, which should be reconsidered in the finance act relate to elimination of 5 percent Workers Profit Participation Fund (WPPF), 2 percent Workers Welfare Fund (WWF) and Professional Tax. Alternatively, the companies should be allowed to use WPPF and WWF funds to build schools, hospitals, and carry out public welfare activities on their own.-PR
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