• Says budget lacks any initiative to attract investment, broaden tax net, create jobs; anomalies remain unresolved

KARACHI: Reacting to the imposition of new taxes and other harsh measures by the finance minister in his winding budget speech, the business community on Saturday said the budget for next fiscal year lacked focus on tapping resources for future development and broadening the tax net besides keeping budget anomalies unresolved.

Secretary General Overseas Investors Chamber of Commerce and Industry (OICCI), Abdul Aleem said after going through the budget speech of the finance minister, “I do not think that Mr Dar and his team have done justice to anomalies which have been raised by the various stakeholders including OICCI.”

He said one of the main issues was the high level of super tax imposed on the large corporate sector. The government has revised some rates and come out with some sort of accommodation to lower levels but most of the big corporate sector is still being asked to pay 10pc super tax which is very harsh and it is not good for investment.

Mr Aleem said the government has effectively increased corporate tax rates to 39pc from 29pc while the regional average is 25pc. “In this environment, how do we expect that foreign direct investment will be attracted apart from different reasons? He added this is a bit of a serious disappointment.

He said the other issue OICCI has noticed is that the government has not taken any measures to broaden the tax base on which key stakeholders have expressed serious concerns.

“I do not know why the government is very happy that Rs9.4 trillion revenue will be collected. This is not enough. There is a lot the government can get on which the stakeholders have suggested various measures,” he said.

One of the good measures taken by the finance minister is to resolve disputes through a sub-committee. “If this committee is active, there is a need to reduce the number of litigations pending and the government and the corporate sector should know about the real obligation. Another good step is the increase in minimum wages”, he added.

“All in all we are not happy and the corporate sector has not been taken good care of,” remarked the OICCI spokesman.

Pakistan Business Council Chief Executive Ehsan Malik said “We don’t have enough details of the changes other than a small cut in expenditure and a further increase in taxes mostly on the already taxed.”

He said he did not see any radical new initiative to expand the tax base especially to bring retailers and wholesalers into the tax net. There is some tweaking in the windfall tax section through a reduction in the look-back period to three years but it will continue to create uncertainty and affect business sentiment.

Mr Malik said the super tax will continue to burden successful businesses that create employment and already generate good tax revenues. A clear message to the companies caught in the tax net is to remain small and under the radar, if possible by splitting existing businesses into smaller units or moving investment out of the country. For professionals, the message is similar – relocate! The main winners are bureaucrats, he added.

Karachi Chamber of Commerce and Industry President Tariq Yousuf said the imposition of 5pc levy on fertiliser and Rs10 per litre petroleum development levy would increase the burden on the masses and hit the industry as Rs215bn new taxes were imposed.

The finance minister had not talked about any future development, resources, rationalisation of power rates and broadening of the tax net.

Site Association of Industry Chairman Riazuddin said “We are waiting for the details of the amended finance bill/act to see the fresh Rs215bn taxation measures but this will certainly make an adverse impact on the consumers’ cost of living and further burden the industries.”

He said the government should have taken measures to bring down general sales tax (GST) to a single digit on essential items, while there is no harm in keeping 25pc GST on luxurious goods.

Site chief there was a need to rationalize customs duty on various goods at a threshold level of 25-30pc to curb smuggling but nothing has been done in the budget.

Published in Dawn, June 25th, 2023