KARACHI/LAHORE: Irfan Iqbal Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has expressed concerns over the federal budget 2023-24, stating that it presents an unrealistic picture of the country’s economy.
Sheikh argued that the budgetary targets are also unrealistic, and the business community will be closely scrutinizing the budget for any hidden taxes.
The target revenue of PKR 9,200 billion outlined in the budget was deemed not only difficult but also potentially having far-reaching negative consequences.
Budget FY24: FPCCI underscores need for introducing taxation reforms
Last year’s revenue target of PKR 7,500 billion was still not achieved despite failing efforts. Moreover, the economic growth rate, which was close to 6% last year, has drastically dropped to a mere 0.29% this year. He questioned the rationale behind imposing more taxes on such minimal economic growth.
Sheikh emphasized that the government’s decision to impose new taxes and increase the tax volume without expanding the taxpayer base or increasing the tax net will burden those already included in the current tax net.
He asserted that the stabilization of interest rates, exchange rates, and petroleum prices is essential for the economy to perform effectively.
While acknowledging the budget’s focus on poverty alleviation, including an increase in loans from PKR 1,800 billion to 2,055 billion, the abolition of duty on seeds, and the introduction of solar energy for tube-wells, Sheikh welcomed the youth scheme and the 50% reduction in tax rates for young individuals.
He stressed the importance of youth creating their own employment and businesses, as new institutions and businesses are not being formed at a satisfactory rate.
The Information Technology (IT) industry in Pakistan has experienced rapid growth, with its share in exports also increasing significantly. The budget’s announcement of benefits and incentives, such as granting the IT sector the status of small and medium-sized enterprises (SMEs), is expected to promote IT development and boost IT exports in the country.
However, Sheikh criticized the allocation of PKR 5 billion for women’s empowerment as grossly insufficient, given the current situation and the proportion of women in the population.
He also called for careful consideration of merit and priorities in the utilization and allocation of the PKR 1,150 billion development budget. Historically, when the government deficit increases, the development budget is often reduced and hindered in its allocation.
Regarding exports, Sheikh emphasized the need to enhance services exports, as the volume of exports from Pakistan’s service sector is not significant. He praised the allocation of PKR 491.3 billion for infrastructure, a move that the FPCCI had previously highlighted in its budget proposals, stressing the dire need for attention to infrastructure development.
Sheikh further noted that increased support for Real Estate Investment Trusts (REITs) would facilitate the completion of pending projects in the sector. He welcomed the allocation of PKR 1,804 billion for defence, considering the current security challenges and terrorism the country is facing, but highlighted the need for additional resources to ensure the nation’s security.
In terms of trade facilitation, Sheikh highlighted measures such as extending the warehousing period for perishable items from one month to three months, providing importers with the facility to go to adjudication through the Custom Computerized System to reduce clearance time, and rephrasing the definition of smuggling to help prevent illicit trade.
He hoped that the abolishment of regulatory duty (RD) on special steel round bars would contribute to sector growth and lead to price reductions, providing relief to the poor. He also praised the removal of RD on IT sector equipment as a positive step that would support the sector’s growth.
However, the FPCCI raised concerns about the one-year extension of the exemption of sales tax on erstwhile FATA/ PATA, as there were demands for the complete abolition of this exemption.
The FPCCI’s critique of the federal budget 2023-24 highlights the concerns and expectations of the business community regarding the economic outlook and policy decisions. As the budget’s provisions come into effect, their impact on the economy and various sectors will become clearer in the coming months.
However, giving his reaction to the media after finance minister Ishaq Dar’s budget speech 2023- 24, Sheikh said economy cannot improve unless the exchange rate and interest rate stabilise.
He said in such difficult economic times it is difficult to achieve 3.5 percent growth rate.
Sheikh said that the real characteristics of the budget will be revealed in the next two to three days. The government is imposing new taxes but there is no increase in the tax net. The decision to increase tax on non-filers is good. There is a need to increase the tax net.
He said the government has taken good decisions for youth. He said giving IT tax sector status to SMEs will increase IT exports.
Irfan Iqbal Sheikh said that government allocation of Rs 5 billion for the empowerment of women is insufficient.
Implementation of the development budget is very important. He pointed out that measures for the improvement of the service sector were not seen. “The announcement of relief regarding the real estate sector is welcome. Our proposal to focus on infrastructure has been accepted,” Sheikh said.
He appreciated government’s measures for curbing smuggling. Abolition of duty on seed import is a good move. He welcomed concessions for pharma sector.
He also welcomed reduction of minimum tax to one percent. A five-year exemption to agro-based SMEs is also welcomed.
Former President FPCCI and Vice President SAARC Chamber of Commerce and Industry Mian Anjum Nisar said 0.6% tax on cash handling has been re-imposed. He said nothing had been clearly mentioned in the budget regarding cotton and general commodities.
He said good steps have been taken with respect to agriculture, but no attention has been paid to research.
Copyright Business Recorder, 2023
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