Strong fiscal policies backed by long-term stability, sizeable budget for energy projects, cut in spending, tax on agri incomes, rationalisation of taxes and decrease in duties on imported raw materials and increase in tax revenues are prerequisites to sustainable economic growth of the country.
This was the upshot of the speeches delivered at a pre-budget seminar jointly organised by the Lahore Chamber of Commerce and Industry and Association of Chartered Certified Accountants (ACCA) here at the LCCI on Tuesday. The speakers included: LCCI President, Farooq Iftikhar, Senior Vice President, Irfan Iqbal Sheikh, President Pakistan Tax Bar Association, Zulfiqar Khan, FCCA, Muhammad Arshad, Senior Partner, Pakistan Law Associates, Syed Mansoor Ali Zaidi, LCCI Executive Committee Member Tanvir Ahmad Sufi and Sana Zeb.
The recommendations also covered Sales Tax, Customs and Income Tax while there was a consensus among the speakers that all economic policies should be aimed at facilitation to growth, be friendly for businesses and easy on spender pockets. Speaking on the occasion, the LCCI President Farooq Iftikhar said that a sizeable portion of the budget should be earmarked for the energy generation projects including hydel and especially for the development and execution of Thar Coal Project.
He said that the shortage of energy is the biggest problem faced by the industry. It has halted the wheels of industry, rendered millions jobless and adversely affected competitiveness and export potential. The LCCI President said that it was a sorry state of affairs that the patterns of budget deficit from previous years continued, as outlays for wages and other expenses, pensions, subsidies, defence, and interest payments substantially exceeded federal tax revenues. It leaves the government's current operations to be substantially financed through debt that serves as another unconstructive factor that causes such negative forces to take place which are ultimately resulted in taking new debts to retire old debts.
He said that a study conducted by LCCI has revealed that only imports from China are causing a loss of 60 billion rupees every year due to misdeclaration and under invoicing. "We at the LCCI have been proposing since long that the rate of customs duty on industrial raw materials not produced locally should be brought down at zero percent, on semi finished goods at 10-15 percent and on finished products at 25 percent. If we want to live or sustain, every taxable income should be taxed irrespective of sector or nature of business whether it is earned from Industry, Services or Agriculture", the LCCI President concluded.
Similarly, Farooq Iftikhar said, the interest payments were also over budget, increasing to 4 percent of GDP and 42 percent of federal tax revenue which pushed domestic borrowing to drive up the government's domestic debt by 27 percent. The LCCI had already proposed to the government to maintain financial discipline for the greater benefit of national economy.
The speakers said that Pakistan external loans have also doubled during last five years and reached the level of $65 billion. For economies at a similar stage of development like Pakistan, it is recommended that debt-to-GDP ratio should range between 30-40 percent.
They said that the most effective way to address the issue of budget deficit is to increase the tax revenues, which is only possible through increasing the tax base. There is a need to tap the potential of tax revenues in agriculture and services sectors. The manufacturing sector contributes almost 26 percent in GDP whereas its share in tax is 66 percent. On the contrary agriculture and services sectors contribute 20 percent and 54 percent respectively in GDP but their respective shares in taxation are less than 1 percent and 33 percent.
They also recommended imposition of tax on agri-based incomes. Furthermore, we have specifically highlighted the need of adding new taxpayers in the tax net rather than further strangling those tax payers who are already paying taxes on regular basis. He said that smuggling and under invoicing are responsible for huge losses to the national exchequer.
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