Budget must be focused on energy sector: LCCI

The budget for the year 2012-13 must be focused on energy sector as country's economic revival hinges on availability of cheaper and uninterrupted power and gas supply. This was the crux of the Lahore Chamber of Commerce and Industry (LCCI) budget proposals for the year 2012-13, finalised after getting feedback from various sectors. Almost all the sectors called for immediate measures to bridge electricity demand-supply gap.
LCCI President, Irfan Qaiser Sheikh said that austerity should be the theme of the budget document and for this purpose the government would have to cut off the unnecessary expenditures as excessive government borrowing is not only resulting in higher interest rates but also restricting availability of cheaper liquidity for the private sector.
The LCCI President urged the government to broaden the tax net by bringing the agriculture and services sectors into the tax net. Public Sector Enterprises (PSEs) like PIA, Railways and Pakistan Steel Mills, generating a loss of Rs 400 billion annually should be managed professionally or be privatised to avoid the huge loss to the national exchequer.
The SRO 111 about whitening of capital through TT must be withdrawn in order to promote tax culture and broadening of tax net. Annex "D" should be abolished from the Income Tax return. The government should withdraw SRO 191 immediately. Rate of minimum income tax of 1 percent of turnover under section 113 is too high.
It is suggested that rate be reduced to 0.5 percent of the turnover. Minimum turnover tax u/s 113 shall not be levied on entities which are bearing losses. If, however, government intends to apply the minimum tax rate, it should not exceed previous 0.5 percent tax of the turnover. While 0.2 percent rate should be applied on distributors, whole sellers and retailers, due to their very thin margin of profit.
Corporate tax shall be reduced to 25 percent from 35 percent for limited companies quoted on stock exchanges. The rate of withholding tax on contracts should be reduced to one percent. The basic exemption limit for income tax should be raised to Rs 500,000 which is in line with the overall inflation of our economy and rising prices of consumer products. The withholding tax at imports U/S 154 is different for Commercial and Industrial Importers which creates an imbalance and opens room for corruption.
LCCI demand that withholding tax should be equalised for both commercial and industrial importers at three percent. Presumptive income should be allowed and withholding tax should be adjustable. Turnover tax should be reduced from 1 percent to 0.2 percent for the indigenous seed industry/companies. There should be no sales tax on import and local supply of plant and machinery.
The LCCI recommends that the sales tax on Agricultural Diesel Engine shall be reduced in the same manner as it has been reduced on agricultural tractors from 16 percent to 5 percent. It is proposed that government should bring down custom duty on light truck tyres from 20 percent to 15 percent.
Custom duty on all raw materials of tyre manufacturing should be reduced to 5 percent. The LCCI strongly recommends that government should bring down custom duty on all plastic raw materials, which are not produced in the country to 5 percent. Poultry sector: Grand Parent Stock is basic seed/raw material for poultry sector; its import should be allowed as duty free instead of 5 percent duty, being charged presently. To impose 15 percent duty on the import of broiler parent stock or hatching eggs to produce broiler parent stock day old chicks. Duty free import of fertiliser raw materials should be allowed into Pakistan.
LCCI strongly recommend that there should be absolute Exemption of sales tax and Custom Duties on import of industrial raw material and plant & equipment. Paper & paperboard should be categorised as a semi-finished raw material for the Printing, Converting and Packaging Industry and as such import duty of Chapter 48 be brought down to 5 percent in existing duty.
LCCI President urged the government to fix the duty of digital camera up to Rs 500. Through this, legal import and proper documentation will start with better revenue to the Government of Pakistan. It is proposed that, 5 percent custom duty be charged on import of PET bottle scrap only. The government must impose Anti-Dumping Duty on coated and uncoated 100 percent wood pulp fibre paper. Plant Growth Regulators (PGRs) are used to enhance the productivity and growth of the plant. It should be exempted from custom duties and other duties.
The government should provide special incentives for the establishment of local hybrid seed production plants as existing seed industry is only providing 4 percent processed seeds to the farmers of total requirement. Subsidised electricity should be provided to the farmers as done in the neighbouring countries.
The government should help to establish latest technology based temperature control storage houses for fruits, vegetables and other crops by providing loan at 8 percent mark up. The government should allow duty free import of power generation plants operated through rice husk. Import of Chicken should be discouraged and regulatory duty at 15 percent be imposed to promote the local industry.
Withholding tax on steel: The material used for converting raw steel to finished item in the manufacturing of machinery is mostly from the unorganised sector. And the small finished parts from (steel parts, electronics etc) retailers are also not accompanied with any proper sales tax input invoice. Even the withholding tax at 3.5 percent liable to the supplier of raw materials is being paid by the industry itself. Therefore it should be abolished.
It is suggested that some facility be given so that taxpayer bring their black money towards establishment of new industrial undertaking. Such taxpayers can be invited to bring their money into investment for new industrial undertaking by paying 3 percent tax on that amount. Payment through crossed cheque as per section 39(4), condition of payment through crossed cheque is not applicable to an advance payment for the sale of goods. Whereas as per section 21(l) any expenditure exceeding Rs 50,000 paid otherwise than by a crossed cheque shall not be allowed as deduction. The provision of section 21(l) is also applicable for the payments made towards purchases of trading account. It is suggested that this discrimination should be removed and payment made in respect of trading account should also not be hit by provisions of section 21(l).