LAHORE: Strong fiscal policies backed by long-term stability, sizeable budget for energy projects, cut in spending, tax on agri incomes, rationalization of taxes and decrease in duties on imported raw materials and increase in tax revenues are prerequisite for sustainable economic growth of the country.
This was the upshot of the speeches delivered at a pre-budget seminar jointly organized by Lahore Chamber of Commerce and Industry and Association of Chartered Certified Accountants (ACCA) here at LCCI on Tuesday.
The speakers included LCCI President Farooq Iftikhar, SVP Irfan Iqbal Sheikh, Pakistan Tax Bar Association's President Zulfiqar Khan, FCCA Muhammad Arshad, Senior Partner, Pakistan Law Associates, Syed Mansoor Ali Zaidi, LCCI Executive Committee Member Tanvir Ahmad Sufi and Sana Zeb.
The recommendations also covered Sales Tax, Customs and Income Tax, while there was a consensus among the speakers that all economic policies should be aimed at facilitation to growth, be friendly for businesses and easy on spender pockets.
In his opening remarks, the LCCI President Farooq Iftikhar said that a sizeable portion of the budget should be earmarked for the energy generation projects including hydel and especially for the development and execution of Thar Coal Project.
The shortage of energy was the biggest problem faced by the industry and it had halted the wheels of industry, rendered millions of workers jobless and adversely affected competitiveness and export potential, he added.
The LCCI President said that it was a sorry state of affairs that the patterns of budget deficit from previous years continued, as outlays for wages and other expenses, pensions, subsidies, and interest payments substantially exceeded federal tax revenues. It leaves the government's current operations to be substantially financed through debt that serves as another unconstructive factor that caused such negative forces to take place which were ultimately resulted in taking new debts to retire old debts.
Similarly, he said, the interest payments were also over budget, increasing to 4 percent of GDP and 42 percent of federal tax revenue which pushed domestic borrowing to drive up the government's domestic debt by 27 percent. The LCCI had already proposed to the government to maintain financial discipline for the greater benefit of national economy.
The LCCI President said that Pakistan external loans had also doubled during last five years and reached the level of $65 billion. For economies at a similar stage of development like Pakistan, it is recommended that debt-to-GDP ratio should range between 30 to 40 per cent.
The LCCI President said that a study conducted by LCCI had revealed that only imports from China were causing a loss of Rs 60 billion every year due to mis-declaration and under invoicing.
"We at the LCCI have been proposing since long that rate of customs duty on industrial raw materials not produced locally should be brought down at zero percent, on semi finished goods at 10-15 percent and on finished products at 25 percent.
If we want to live or sustain, every taxable income should be taxed irrespective of sector or nature of business whether it is earned from Industry, Services or Agriculture," the LCCI President concluded.
Other speakers were of the view that most effective way to address the issue of budget deficit was to increase the tax revenues, which was only possible through increasing the tax base and there was a need to tap the potential of tax revenues in agriculture and services sectors.
The manufacturing sector contributed almost 26 percent in GDP whereas its share in tax was 66 percent. On the contrary, agriculture and services sectors contributed 20 percent and 54 percent respectively in GDP but their respective shares in taxation were less than one percent and 33 percent.
They also recommended imposition of tax on agri-based incomes and asserted that smuggling and under invoicing were responsible for huge losses to the national exchequer.
The LCCI and ACCA also signed an MoU to further enhance their cooperation in various areas of economy.
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