The government took neither Parliament nor the business community into confidence on additional taxes of Rs 40 billion with the formal sector complaining that the package would disadvantage them against the informal sector. Talking to Business Recorder, Chief Executive Officer of Pakistan Business Council (PBC) Kamran Y Mirza, said additional taxes would put more pressure on existing formal industry and provide incentives to informal sector. The government may have short-term benefit of revenue but these measures would prove destructive for the economy and industry.
He argued that after the new taxes, inflow of smuggled goods would increase manifold as locally produced items would be more expensive as compared to smuggled ones. The additional duty would help smugglers and tax evaders to capture the space created by the formal sector as these measures have not reduced consumption in the past. He also cited the example of cigarettes, saying that their use has never been discouraged through higher taxes and the space created by the formal sector was captured by the informal sector of Khyber Pakhtunkhwa and now there is 22 per cent informal cigarette sector in the country.
Mirza expressed grave disappointment over the tax measures announced by Finance Minister Ishaq Dar with the approval of Prime Minister and Economic Co-ordination Committee chaired and stated that no one would invest in the country when there are additional taxes every three months. This, he said also reflects a complete failure of the government to broaden the tax base and instead continue to increase reliance on indirect taxes which would ultimately burden the common man. Pakistan Business Council (PBS) was not taken into confidence, he said adding "we had already proposed to the government when the budget making process was going on to broaden the tax base and go for direct taxes as share of indirect taxes was already very high and these are anti poor". He said it was very surprising that on the one hand the government was negotiating with traders not willing to come into the tax net for the past five months leading to a reduction in withholding tax from 0.6 per cent to 0.3 per cent on their banking transaction while on the other hand it has penalised honest tax payers and tax return filers.
President of Islamabad Chamber of Commerce Industry (ICCI) Atif Akram Shiekh stated that the government did not consult them before taking these measures, adding the government decision to impose a 10 per cent additional duty on import of raw material would increase the cost of finished products and would, in turn, burden the consumers. An additional duty on some essential commodities would add to the woes of the poor, he added. Former Advisor to Prime Minister on Finance said the government should have routed additional taxes through parliament especially when the IMF insisted against issuance of SROs by the Federal Board of Revenue (FBR) without the approval of the Parliament. The IMF has not so far scheduled its Executive Board meeting to consider ninth review of EFF; however, sources in Finance Ministry stated that the mission is expected to complete its staff level report on ninth review by the end of the month but with Christmas and New Year holidays it is likely that the board meeting maybe scheduled in the middle of or early January. The source further maintained that there would be no issue in approval of the release of the tenth tranche by the Executive Board of the IMF after the government has imposed Rs 40 billion taxes to bridge the revenue shortfall for the first quarter of the current fiscal year.