Federal budget 2013-14: business community hails measures for mobilisation of trade, industrial activities

Business community hailed measures in the federal budget 2013-14 for mobilisation of business and industrial activities in the country in prevailing circumstances. They said that the budget will instill confidence in the business community and it will encourage substantial national and foreign investment in the country.
The Karachi Chamber of Commerce and Industry (KCCI) says that 70 to 80 percent measures in the budget are business-friendly. However, other industrials and traders said the budget failed to meet their expectation and without any relief to general pubic. They said that the negative impact of the budget have started to come up as Petroleum Ministry revised petroleum products prices upward after GST rate was raised by one percent in the budget.
Increase in petroleum products' prices will have multiple impacts on production as transportation and power tariff will go up ultimately. They said that the budget carries nothing for the voters and supporters of PML-N. Acting Chairman, Pakistan Soap Manufacturers Association (PSMA), Abdullah Zaki, while reacting over the budget 2013-14, said that the Federal Budget 2013-14 was neither up to the expectations of industrialists, business community, nor it contained any relief for general public.
The budget makers must consult business community and all stakeholders of the country before finalising the budget. It lacks any vision to help address poverty rather increase in taxes would further add to the miseries of the masses, he added. The increase in general sales tax (GST) from 16 to 17 percent will directly affect the poor masses. It would result in further hike in manufacturing cost, which will increase the burden on the poverty-stricken people.
"In the present circumstances, we were hopeful that the newly-formed government will present a balanced budget in order to meet the challenge of economic crisis, but the budget makers did not take appropriate steps for major problems of the Industry as well as general public," he said. He maintained that the government completely ignored the suggestions and proposals of trade and industry. He termed the overall budget as not people friendly. He criticised the government for ignoring the salaried class and increase in taxation measures.
Abdullah Zaki suggested that duties on industrial raw materials, which are used in the manufacturing of products (commonly used by the consumers) should be zero rated, as soap is an item of daily use in every home and consumed by every person. Therefore, industrial raw materials used in soap industry should be allowed to import on zero margin. Another industrialist, Abdul Aziz, said that the finance minister had set huge revenue collection target for next year even when the present year target was not achieved.
Former Vice President FPCCI, Zubair Tufail, appreciated budgetary measures and welcomed the decision to cut Prime Minister's House expenses by 45 percent, not to import new vehicles, reduction in corporate sector tax and establishment of new industrial zones. Former Vice President of FPCCI, Khalid Tawab, said that the budget would instill confidence in the business community and it would encourage substantial national and foreign investment.
He said that the industry appreciated governments' resolve to tackle circular debt and energy crisis. He said that the availability of electricity and gas was priority for the industry and the government should come up with solid action plan to tackle the issue. Moreover, reforms regarding water, infrastructure development and social uplift are commendable, he added.
Former President of KCCI, A.Q. Khalil, said that after 18th amendment several departments had been transferred to provinces including health, education and now it was important to watch provincial budget as well. Chairman GST and Refund Sub-committee of Karachi Chamber of Commerce and Industry (KCCI) Mohammad Ibrahim appreciated measures adopted for austerity drive started from Prime Minister House. He said that one percent increase of sales tax would increase prices of all commodities.
He said that it was long pending demand of business community to reduce sales tax which was negated and instead it was increased from 16 percent to 17 percent. Karachi Chamber of Commerce and Industry (KCCI) in a press statement stated that the new Government's budgetary measures for 2013-14 incorporate the major policy decisions to put the economy back on track. KCCI believes 70 to 80 percent measures are business-friendly.
The bold and decisive measures announced are expected to yield positive results in the near future. Indeed the new government's resolve to curtail fiscal deficit, reduce domestic debt and rely more on country's own resources are commendable. However, unfortunately it seems the FBR has inserted some harsh taxation measures which are likely to cause hardship to the trade and industry and have a negative impact on investment climate.
The KCCI believe largely the budgetary measures are business-friendly. The decision to stop the discretionary fund for parliamentarians and reduction in expenditure of the Prime Minister House and ministries is a commendable yet symbolic gesture by the newly-elected government. Increase in GST by one percent (from 16 percent to 17 percent) will only yield Rs 50 Billion which is hardly 1.25 percent of the total revenue outlay while the burden will be passed on to the common man. Therefore, it is suggested to recover the meager amount through other measures and save the common man from further hardship.
Some ambitious targets have been set by the Finance Ministry which look difficult to achieve. Total tax revenue target set at Rs 2598 billion is unlikely to be achieved in view of last year's dismal performance and the lack of clear strategy of expanding the tax net and increasing the number of registered persons. The GST on zero-rating on all domestic supplies other than exports has now been converted to exemptions. Items of multiple use and finished articles to be excluded from the list of reduced GST items at the rate of 2 percent within the five export-oriented sectors.
The announcement by Finance Minister that the notorious circular debt of Rs 500 billion is going to be resolved within 60 days is welcomed by business community but a clear road map is missing in the budget documents. The new budget 2013-14 has put further tax burden on those who are already crushed under the heavy taxes and draconian tax laws while no effort has been made to broaden the tax net and bring the influential and powerful evaders into the tax net.
Meanwhile, Dr Mirza Ikhtiar Baig in his comments said that the budget would cause inflationary impact due to increase in sales tax from 16 percent to 17 percent and imposition of various indirect taxes. "It negates the policy of the government that they will not further tax the existing taxpayers and instead would broaden the tax net by bringing new unregistered person in the tax net," he added.
Dr Baig said he was expecting some growth-oriented policies to take the growth to the higher mode but in the budget there was no such incentives for industrialisation and new job creation. Dr Baig strongly criticised 100 percent increase in turnover tax and imposition of wealth tax.