The SITE Association of Industry (SAI) has recommended the Government to save industries from closure, prevent further unemployment and strengthen the role of the Industrial sector in import-substitution and export-promotion.
SAI urged in its Federal Budget Proposals 2023-24 that the government to remove unannounced and imprudent restrictions on imported raw material, machinery and spares since such reckless curbs have brought down the output of the Industrial sector which has further deepened the ongoing economic crisis thereby putting the collection of government’s own tax targets into jeopardy.
Overall, the inflation and rising cost of doing business coupled with lending rates for industry, as high as 22-23% have broken the backbone of the economy. The government needs to take immediate measures to save the industrial sector from falling sick –– a dire state, which, if allowed to go unabated, would never be reversible in the future.
The State Bank of Pakistan’s (SBP) EPD Circular No 20 of 2022, has created more problems than it could have solved and some of its provisions are in contravention of the SBP Foreign Exchange Regulation/Manual, it said.
The abovementioned circular needs elaboration, clarification and amendments to the extent of providing a complete framework of what SBP calls “self-funded imports”, it demanded.
The industry representative body also pointed out the perennial issue of low tax-to-GDP ratio, narrow tax base and the counterproductive taxation policies which provide incentives to the non-taxpayers rather than incentivizing the honest taxpayers which is a critical factor for promoting a documented economy and a thriving formal sector.
The Association recommended a unified tax number for both income and sales tax and no sizable business should be allowed to operate without acquiring a tax registration certificate and this should be the responsibility and a key accountability of FBR.
The plethora of withholding and presumptive tax provisions have distorted the whole ‘income tax’ regime which has become anything but not really a tax on income! Presumptive and withholding regime needs to be consolidated and systematically replaced with a ‘tax on income’, says the SAI proposals.
SAI demanded reduction in the rates of turnover tax by at least 50 per cent from the current year thereby allowing the businesses to pay income tax according to their assessable income and pay or adjust sales tax according to their actual turnover and value addition.
Other proposals included reduction in the general sales tax (GST) rate from 18 to 15 per cent and abolishing 3% further sales tax on unregistered persons while making it mandatory for FBR to register every sizeable business for sales tax purpose.
Tax refunds should be expedited within 60 days of refund application otherwise the sales tax zero-rating of the whole supply chain of zero-rated goods should be restored.
Rampant under invoicing and misdeclaration is badly damaging the local Industry and depriving the exchequer of its much-needed revenue. SAI recommended consolidation of varying rates of statutory custom duty, additional custom duty and regulatory duty into ‘one custom duty’ with a maximum slab of 25% while appropriately cascading the tariff structure, i.e., starting rate of 0% on raw materials with increasing tariff rates, with stages of production and value addition up to the finished product level. Such a move would render smuggling unviable and clandestine imports unfeasible.
SAI President Riaz Uddin addressing budget proposals to the Minister of Finance, Governor State Bank and Chairman FBR hoped that the recommendations would meet approval in the best interest of the country.