ISLAMABAD: Tax experts and representatives of steel industry have stressed for an end to discrimination in the levy of turnover tax across different industries. Adding that there is an urgent need for rationalization of turnover tax rate for industries and also for increasing the adjustment period of turnover tax to 10 years or more.

These demands were made in a public-private dialogue organized by the Sustainable Development Policy Institute (SDPI) in collaboration with the Pakistan Association of Large Steel Producers (PALSP) to discuss the impact of Taxation Policies on steel sector, particularly the levying low turnover tax for the ‘blue eyed’ industries and high for the rest of the industries.

‘The current turnover tax regime exhibits regressive and discriminatory characteristics, reflecting an unfair policy approach by the policy makers.’ In the session, it was stated that such reforms are crucial for creating conducive business environment and for promoting equitable growth across different industries.

Contrary to the perception, IMF is opposed to the levy of turnover tax, which reflects ad-hoc approach in tax collection by the policy makers.

‘For some industries, the turnover tax rate is 0.5%, while for others, it is as high as 1.25%, including the steel sector which faces discriminatory treatment compared to other industries.’

The experts were of the opinion that in the current extraordinary difficult economic situation, the local steel industry is struggling to survive and experiencing a severe financial crunch. This is due to the massive increase in capital requirements caused by the devaluation of rupee, coupled with sky-high interest rates, rising energy prices, and large-scale smuggling of steel from Iran.

The combination of these factors has created a very challenging environment for the industry, leading to significant losses. In this forced kind of situation where the industry is incurring heavy losses, there is a need to provide breather to the industry, instead of burdening it further with the levy of highly regressive turnover tax.

During the dialogue, it was also highlighted that reforming the current anti-business taxation policies has become imperative for the growth of the steel industry as well as other sectors. The rising cost of doing business is compromising the competitiveness of the industry.

Copyright Business Recorder, 2024