KARACHI: In a letter to the FBR Anomaly Committee, the Overseas Investors Chamber of Commerce and Industry (OICCI) has highlighted critical anomalies in the proposed Finance Bill 2024-25 that will significantly impact business and economic viability.
The letter draws attention to the proposed imposition of 2 percent additional customs duty (ACD) on 1600 line items/products with effect from July 1, 2024, even though this was not included in the Finance Bill 2024-25 but will be imposed by the federal government through SRO to be issued by the FBR.
These raw materials are currently not being produced in Pakistan and imported without any custom duty to support the local manufacturing industry. The existing tariff structure for these items was rationalized by the National Tariff Commission, in line with the National Tariff Policy, after a comprehensive review of the value chain over a period of multiple years.
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Experts believe that the 2 percent ACD on these raw materials should not be imposed as it will result in severe anomalies for all products in the entire value chain. Consequently, this additional customs duty will further increase the domestic industry’s cost of production and make operations unviable in an already tough macroeconomic environment.
The OICCI letter also describes the proposed amendment relating to the disallowance of 25 percent of total expenditure on sales promotion and advertisements [section 180] as highly arbitrary and subjective. Further, the removal of branded milk and tea whiteners from zero-rated sales tax regime will have a double adverse impact on branded milk processors as they would have to charge 18 percent GST on their sales and the input taxes incurred by farms will also become part of their costs.
The business advocacy group points out the government must take measures to bring distributors, wholesalers and retailers into the tax net. The proposed amendment of collecting 2 to 2.5 percent advance tax from these market participants is merely shifting the burden of their non-compliance to existing businesses.
The proposal to deduct income tax on export proceeds at a Minimum Tax rate, instead of the existing Final rate, will result in a higher taxable income of 29 percent for the exporters, 17 percent accounting profit or tax deducted on export proceeds and a maximum rate of 10 percent super tax. Therefore, exporters, already reeling under pressure of high energy costs, would lose their global competitiveness and a decline in exports would adversely impact the foreign exchange reserves.
Further, the OICCI letter has voiced a concern that the proposed reinstatement of Commissioner’s powers to reject advance tax estimates may lead to unnecessary harassment of advance taxpayers, primarily from the organized corporate sector.
At the same time, the withdrawal of Commissioner’s powers to issue withholding exemption certificates [section 153 and 159] will aggravate the already alarming refund position of PKR 94 billion.
Copyright Business Recorder, 2024
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