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Pakistani businesses not happy with new proposed taxes

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KARACHI: Pakistani businessmen on Friday raised red flags on various taxation measures proposed in the Supplementary Finance Bill 2021-22, under the pressure of the International Monetary Fund (IMF) and demanded the government to revisit the bill.

“These measures will not only have negative implications for industry and trade, but will also overburden the poor and middle-class segments due to increase in prices of consumer goods,” said the leadership of Karachi Chamber of Commerce and Industry (KCCI) and Businessmen Group (BMG) in a joint statement.

The statement was issued by Chairman Businessmen Group Zubair Motiwala, Vice Chairmen BMG Tahir Khaliq, Haroon Farooki, Anjum Nisar & Jawed Bilwani, General Secretary BMG AQ Khalil, President KCCI Muhammad Idrees, Senior Vice President Abdul Rehman Naqi, Vice President Qazi Zahid Hussain, and Former Senior Vice President Ibrahim Kasumbi.

They demanded the Supplementary Finance Bill should be revised and not be implemented without taking the main stakeholders on board.

They pointed out harsh measures and withdrawal of exemptions on inputs of essential consumer items such as packaged dairy milk, oil seeds for sowing, plant & machinery and industrial raw materials including raw cotton would have a detrimental impact on the economy by terribly affecting industrial performance and also the lives of the poor masses.

“These harsh measures have been imposed to such an extent that they have imposed taxes even on milk and many other items of daily consumption, making the lives of the poor masses more miserable.”

Plans of increasing petrol prices by Rs4 per liter every month and raising electricity and gas tariffs meant IMF had devised a programme to make Pakistan completely unviable, they added.

They emphasised that instead of putting additional tax burden on industry and consumers for complying with IMF conditionalities, the government and Federal Board of Revenue (FBR) should intensify efforts to broaden the tax base and generate additional Rs340 billion.

In fact, they said, the government could generate significant additional revenue by plugging various loopholes including exemptions given on import of various items for PATA/FATA, which were massively being abused.

“This includes steel sheets, bulk edible oil, steel sheets and plastic materials etc. moreover, massive smuggling of black tea, edible oil from Iran, auto parts and many other high value products is also going on which causes heavy loss of revenue to the exchequer.”

The businessmen said the IMF could only provide broad guidelines to curtail fiscal deficit, but should not be allowed to micro-manage the economy.

“Therefore, it is unjust and unfair to continue targeting those sectors which are tax compliant and unable to bear more taxes.”

BMG and KCCI leadership stated that Vide Amendment

Sec.23 (sub-sec.1, G) of Sales Tax Act 1990, the supplier had been held liable under the new law for fake CNIC number provided by purchaser, whereas earlier the Seller/Supplier was not held responsible for fake CNIC provided by purchaser.

“Already small number of around 50,000 entities are registered in Sales Tax regime. Adding burden of liability for fake CNIC and further tax of 3 percent over and above 17 percent, will result in many persons going out of Sales Tax net and is tantamount to absolving the tax authorities from broadening the tax base,” the businessmen said.

It appeared that business and industrial community was being compelled to shut down businesses forever, they said, adding that the rate of Sales Tax on import of raw material had also been increased from 5 percent to 10 percent. “If somebody comes in and buys in cash and pays the penalty described under law then how can a seller ask for verification of CNIC. Why should we ask for CNIC verification when he is paying 3 percent additional charges surcharge?” The government must understand they were granting permission to stay unregistered by paying 3 percent penalty, they said.

They added that despite better crops and increase in output of raw cotton, a shortfall of about 4.5 to 5.0 million bales was likely, which would result in higher cost of finished products of domestic textile industry.

With recent incentives provided under TERF, a substantial number of plant and machinery for textile industry had already been imported and a huge lot was also in the pipeline.

“Increase in Sales Tax on raw cotton would be counterproductive at this stage hence the government must restore concessional rate of 5 percent Sales Tax on import of raw cotton to support the industry,” they urged.

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