OICCI dubs 5.7 percent growth target 'challenging'

Pending a detailed review of Finance Bill 2016-17, OICCI consider that the budget targets especially the GDP growth of 5.7 percent for next year will be highly challenging and will depend considerably on the robust growth in the agriculture and export sectors which have been rightly offered significant incentives in the proposed budget 2016-17.
Similarly incentives in respect CPEC related projects and businesses linked to Gwadar Free Zone is a good step, said the Overseas Chamber in a statement Friday.
Overall, however, the budget appears to be a traditional budget with continued reliance on the withholding tax regime. There were no details shared of the government's plan to improve governance , bring the informal sector in the tax net, reduce the burden of the existing tax payers, plans to reform the taxation system, to document the economy, broaden the tax base and improve Pakistan's rating in the Ease of Doing Business. Moreover, Development expenditure should have been further enhanced by lowering current expenditure which would have created employment.
In terms of foreign investors, who are members of OICCI, the extension of benefits until June 2019 for investment under Balancing, Modernization and Replacement and also reduction in the equity component to 70 % on new investment are positive steps. However, the budget proposals lack any out of the box initiative to attract new large FDI which currently is not attracted to Pakistan, despite various incentives and very positive Business Confidence.
Further, the imposition of Super tax of 3-4% for another year during 2016-17 despite one percent reduction in the corporate tax rate (31%) will effectively increase the tax burden of OICCI members to 34-35%. This will negatively impact on the confidence of OICCI members who were given to understand last year that this super tax was meant for one year only. Moreover, we understand that input Sales tax on services paid to the provinces will no longer be allowed to be adjusted against Federal taxes. This will have a huge negative impact on cost of doing business.
Overall, the budget proposals although growth oriented but appear largely traditional and may not be sufficient to kick start the economy at a high pedestal.-PR