PHMA prepares budget proposals

The Pakistan Hardware Merchants Association, PHMA, (Northern Zone) in its Executive Committee Meeting held at its zonal office, presided by the Association Chairman Engr. Sajjad Afzal Sheikh on Budget Proposals for Financial Year 2013-2014.
The situation of present business conditions were discussed at length with respect to law and order situation, peak un-scheduled load shedding of 16 hours in the business centers of the Metropolitan Hubs of the Punjab and KPK, weak social reforms, friction among the institutions had made economic activity to stand Still. Numerous resources were discussed, which can be made viable for the country, but instead, we are relying on foreign aid of donor institutions like IMF and World Bank for our needs. PHMA stressed on the slogan "no aid but trade".
PHMA emphasised the government to broaden the tax base rather than increase the sales tax percentage by 2-3 per cent from present VAT rate of 16 per cent by FBR. Under the present circumstances when country's economy has been crippled due to severe energy crises, law and order situation, high inflation due to severe devaluation of Pak Rupees, the margins on the items are almost squeezed.
The high rate of tax is big discouragement for an honest tax payer result in higher smuggled items. It is, therefore, suggested to bring the VAT rate at 10 per cent. It is further suggested in the meeting that a sustained economic growth can be achieved through macro-economic stability and fiscal prudence and should stop bleeding the Public Sector Enterprises. Broadening our tax base should cover all sorts of area without any prejudice. Pakistan tax to GDP ratio is woefully inadequate at 9 per cent as compared to the other Asian economies of the region such as Sri Lanka at 17 per cent, India 19 per cent, China 21 per cent and Malaysia 15.5 per cent and if we see the Europeans they are beyond 30 per cent.
Pakistan economy has been built on the same model as China and Taiwan. The later economy's growth has been due to their concentration on SME sector and making them more vibrant for the increase in their tax to GDP ratio. PHMA emphasised on developing a fool proof system in building of institutions of the country. Introducing a tax culture within business community requires good marketing strategy.
Government has to understand that introducing tax reforms is like selling a new product in the market. Benefits should be introduced instead of harassment culture. In this connection, privilege, honest and competitive personals should be recruited which can grab handsome market share as far as broadening of base is concerned.
PHMA strongly condemned the SRO 98 issued by FBR on Withholding Tax (WHT) and demanded for its abolishment. At the same time the Amnesty scheme have been criticised, regarding whitening the assets of non tax payers thru foreign remittances and other unorganised means and bringing a tax evader with the status equivalent to an old and honest tax payer.
Tax Credit for equity Investment for BMR (Balancing, Modernising and Research) on the investment of Machinery should be given in the form of credit reduction in liabilities. Audit should be conducted once in 5 years and should not be repeated on yearly basis. This will reduce mistrust between the tax payer and tax collector. Instead of Book Keeping and preserving it for five years time, the period of two years been advised. As per Sec 177 (Income Tax), the Commissioner has been empowered to call any tax payer for audit.
It is suggested that, instead of commissioner, the FBR should frame a committee under relevant law and procedure in order to select the case. Regarding Input Adjustment, under Sec 7 (Sales Tax Act), it is advised to make a system reliable with regards to not accepting the purchases, if made, from a Blacklisted person. Instead of the responsibility be kept on the shoulders of tax payer, the system be made fool proof.
The Ex-Chairman (PHMA) Central, Sardar Usman Ghani present on the occasion has suggested to shift the Customs Valuation Department to Islamabad, instead of Karachi due to Law and order situation. Secondly, Punjab being as hub of consumption with almost 80 per cent of hardware items, the community, with its day to day connection with the valuation department, it is suggested that the office be within the reach, so that timely action can be taken by our importers.