The Lahore Chamber of Commerce and Industry (LCCI), in its budget proposals for 2008-09, has demanded of the government to slash the existing rate of sales tax from 15 to 10 percent, which will help national exchequer to earn more revenue on the one hand and provide relief to the general public on the other.
LCCI President Muhammad Ali Mian said on Tuesday the sales tax collection, during the last 10 years, was increased from Rs 55.66 billion to Rs 309.39 billion, which reflected the government had been generating good amount of tax under this head.
He said it was also evident that with the reduction in tax rate, the collection of revenue was increased, and suggested that the government should further reduce the rate of tax from 15 percent to 10 percent, enabling the business community to contribute more to the national exchequer.
He was addressing a press conference along with the LCCI Vice-President Shafqat Saeed Piracha, PIAF Chairman Mian Abuzar Shad and other executive committee members. At present, the business community was facing sever energy crisis, which was compounded with the increased mark-up rate, while the industry was facing gas shortage since December 2007, he added.
He apprehended that in the days to come, "we are expecting sever load-shading because of low water availability in the country." According to an estimate, the thermal electricity, produced by the companies is costing around Rs 16 per unit due to high furnace oil prices.
He pointed out that bicycles were zero-rated in the 2007-08 budget vide SRO 462(I)/2007, but cycle tyres and tubes, a major component of bicycles, were, however, subjected to 15 percent sales tax. Bicycle tyre and tube manufacturers in the organised sector, he said, were facing extinction from manufacturers in the un-organised sector, which were evading sales tax and other taxes; thereby enjoying an unfair advantage vis-a-vis organised manufacturing units.
He said the problem was further compounded due to import of tyres and tubes from China and other sources at highly under-invoiced values. As a market practice, the bicycles were sold by manufacturers without tyres and tubes in the market, he said, adding at the time of purchase of cycle by consumers, cheaper tyres and tubes produced by un-organised sector, without payment of sales tax, were mounted on cycles by retailers.
To provide a level playing field to the organised sector and to ensure that bicycles reach the consumers at truly zero-rated prices, it was proposed that bicycle tyres and tubes could also be declared zero-rated. He said it would not only be in line with the intention of the government to reduce burden on poorer sections of the society, but would also result in revival of organised sector and availability of quality product in the market.
The LCCI President said the concept of voluntary registration was abolished in the sales tax regime about three years ago. In certain cases, small manufacturers would like to be registered and pay sales tax so that they could pass on sales tax paid on purchase of raw materials to the next buyers and thus complete the tax claim.
It was, therefore, proposed that the concept of voluntary registration in case of manufacturers might be re-introduced, he said, and added the small vendors of, say Millat Tractor Limited, Honda Cars Limited etc, were suffering because they could not pass on the tax paid on the purchase of the raw materials on the supply of parts to the organised sector.
Re-introduction of voluntary registration would remove this distortion, he added. He stressed the need for initiating tough measures to reduce the increasing burden on local manufacturing industries, and demanded of the government to announce a package for the revival of the industry and business, which were undergoing tremendous pressure owing to multiple reasons, including high oil prices and energy shortage.
Mian said the present time was not conducive for new investment and the government should, therefore, introduce comprehensive package for the revival and sustainability of the existing industries. Lamenting the excessive use of under-invoicing, he said the quantum of under-invoicing had touched five billion dollars and if the government succeeded in curbing this malpractice, the national exchequer could earn an additional amount of Rs 40 billion.
He also said that there were thousands of organisations paying electricity bills, amounting to over Rs 600,000, who unfortunately could not be brought under the tax network despite the Federal Bureau of Revenue (FBR) plan. He urged the government to bring all such organisations under the network to widen the tax base.
Speaking on the occasion, PIAF Chairman Mian Abuzar Shad demanded of the government to take step for the establishment of business courts in the upcoming budget to deal exclusively with the matters concerning the business/transactions so that speedy justice for the encouragement of business activity in the country could be ensured.
He said that China was producing 80 percent of its electricity through coal and the Pakistan government should convince the Chinese government to also facilitate Pakistan in coal-based electricity generation. He also stressed the need for developing mines in for the exploration of copper and coal etc in Balochistan and Sindh provinces.