Tax exemption, zero rating: concerns voiced over secretary finance's statement

The business community is greatly perturbed to read the statement of Secretary Finance, Dr Waqar Masood Khan in Daily Dawn of on Saturday, proposing complete withdrawal of tax exemption and zero rating, lamented President Karachi Chamber of Commerce & Industry (KCCI), Muhammad Saeed Shafiq.
Shafiq said that Dr Waqar Masood Khan is not aware of the discussions, which continued for more than 15 days on the intricacies of zero rating at KCCI wherein Karachi Chamber played a positive role. In-spite of the fact that RGST was totally rejected by the business community, marathon meetings and discussions continued for four days between the Finance Minister, Dr Abdul Hafiz Shaikh, Chairman, FBR, Salman Siddique and his team and business community leaders in the endeavour to keep the wheel of industry moving as well as realising the fact that five zero-rated export sectors are the backbone of economy with a contribution of more than 60 percent of country's total exports.
He said it is noteworthy that the government and the business community leaders have always been agreeing on one point, which is continuity and stability of the policy and in these meetings, apart from deciding the modus operandi of collection and its rate, it was also demanded by business community to adopt the agreed policy for a period of three years. Chairman FBR was of the view that the agreed policy should be for two-year period. It was never on the cards that this agreed policy would last for only two months.
Therefore, giving such statements in the press shatters and completely shakes confidence of the investors because all the hierarchy of the Government - President, Prime Minister, Finance Minister were on-board and agreed to this decision. The major reason of this was the aim to avoid corruption of huge dimensions in seeking refunds under the mode of flying invoices, over invoicing, frauds in refunds etc.
KCCI President said that the sectors, which export 80 percent and more of the production cannot be subjected to such syndrome of refund regime which would be a sheer exercise in futility. Even today, these sectors are plagued with numerous burdens in the form of severest ever liquidity crunch owing to huge amounts of Drawback Claims; Sales Tax Refund Claims and Custom Rebate Claims coupled with high cost of doing business, frequent load-shedding of gas and electricity, leading to closures of factories and greatly endangering this sector generating huge employment and great earnings in foreign exchange. We therefore most fervently appeal to the President, Prime Minister and Finance Minister to continue with the agreed policy as any change as feared by the business community after reading today's statement of Dr Waqar Masood Khan, Secretary Finance, would be a fatal blow to crush the vibrant sector, the backbone of nation's economy, he concluded.-PR