Budget proposals: zero-rate tax suggested for pharmaceutical supplies

Country's pharmaceutical manufacturers have demanded that pharmaceutical supplies should be zero-rated and all the tax paid at purchase stage may be refunded. Pakistan Pharmaceutical Manufacturers Association (PPMA) in its proposals for budget 2007-08 suggested the Central Board of Revenue (CBR) to exempt pharmaceutical supplies from duties.
The manufacturers said that presently pharmaceutical supplies are exempted from sales tax, hence the sales tax paid at purchase stage becomes a part of the cost, resulting in high cost of doing business.
The addition into zero-rated would reduce the cost of pharmaceutical products, making it more competitive in international market and local consumer would also be benefited by low priced products.
The proposals also mentioned high corporate taxes, which hampering local pharmaceutical industry to sustain. Therefore, it is suggested that corporate taxes should also be reduced.
They also raised the issue of taxes on all types of utility bills, which also making difficult to produce cheaper medicine for poor masses. It was proposed that tax on salary class should be further reduced to 50 percent on all the existing slabs.
They said that salaried persons are adversely affected by the higher amount of taxes and they should be given relief in the upcoming budget for the fiscal year 2007-08.
A PPMA official said that India and China are low-cost drug manufacturers and Pakistan competing with the neighbouring countries, hence Pakistan government should provide incentives to the local industry.
The industry had registered 17 percent growth in the year 2006 and total market size expanded to 1.6 billion dollars without government support. The phenomenal growth was the impact of increase in population in the country and post effects of earthquake 2005.
The country was heavily dependent on imported medicines in the past but now local industry was fulfilling 90 percent of the domestic demand. Last two years government's inconsistent policies were creating problems for the industry and several manufacturers had stopped the production of life-saving drugs because cost of production had gone beyond limits.
Given the significant level of foreign investment and international quality of locally produced products, it is only fair that the government seriously consider the negative impacts of the current economic environment upon the industry while making decisions, the spokesman said.