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There has been no progress on the ground with regard to pledges made with business community during their recent meetings with Prime Minister Imran Khan and Chief of Army Staff Qamar Javed Bajwa, was consensus during an Aaj TV programme Pasia Bolta Hai with Anjum Ibrahim.

Arif Habib, Chief Executive of Arif Habib Corporation Limited, and former finance minister Dr Hafiz Pasha were speaking as guests in the program and Arif Habib stated that the sales tax bond issue was raised during the meeting as the bonds issued by the Federal Board of Revenue (FBR) were not marketable/ bankable.

He said the government assured of making the bonds marketable, and the issue may be resolved in a week or ten days as chairman Federal Board of Revenue has claimed that work on it is in the last stage.

He said there was an understanding that the bonds to be issued by the FBR would be Statutory Liquidity Ratio (SLR) eligible but the State Bank of Pakistan (SBP) was unable to make them SLR eligible without a government guarantee and Finance Ministry was unable to issue guarantee due to IMF program. Now an alternate solution has been discussed and agreed upon that bond would be for a fixed period of three years and profit rate would be Kibor based instead of 10 percent.

However, former finance minister Hafeez Pasha did not agree and contended that he was unable to understand the reason for issuance of sales tax refund bonds as paying refunds in cash is the responsibility of the government and commitment to exporters. Pasha further contended that as per reports, the government has issued Rs 30 billion sales tax refund bonds in the first quarter of current fiscal year against the claim of Rs 75 billion,

Arif Habib acknowledged that Pasha was right that sales tax refunds must be paid in cash and conceded that textile exporters also pointed out that their current sales tax refunds are not also being issued and the government assured them that their refund payment would be expedited.

On the issue of real estate sector, Arid Habib maintained that the government has agreed to introduce a fixed tax regime on real estate and it is expected to be announced it in a few days.

However, Pasha argued, "If the fixed tax is introduced for one sector then why it can't be introduced for small traders and others." He said that the principle of fixed tax must be applied across the board and not for one sector, if it is applied.

On the issue of axle load, Habib stated that the issue of axle load also came under discussion during the meeting with the COAS and traders apprised the COAS that limit on axle load was impacting availability and increasing cost.

Habib added that this was pointed out during the meeting that FWO wear and tear cost has been increased, upon which businessmen agreed to pay the wear and tear cost to FWO through increase in toll tax. Upon this, he maintained that the Chief of Army Chief promised to resolve the matter.

However, Pasha argued that the problem of transport sector is greater than axle load, saying slowdown led to decline in transport demand which was also reflected from decline in consumption of high speed diesel. High speed diesel consumption decreased by 18 percent and this was perhaps because of underlying slowdown of the economy and decline of production in agriculture and industry transport.

Habib added that after challenges of first quarter slowdown, the government was worried because of its impact on FBR revenue and the Prime Minister and the Chief of Army Staff held meetings with businessmen. Habib said that some uptick in demand is visible in October and sounded optimistic that second quarter would be relatively better. He attributed slowdown in the first quarter (July-September 2019) to budget announcement, CNIC issue, Eid holidays and Muharram.

Dr Pasha, however, said he does not see strong indications of economic recovery and stated that State Bank of Pakistan (SBP) report indicates a 24 percent increase in non-performing loans (NPL), which implies that that production has slowed down and the industry is unable to pay back its loan. He said that he does not see strong indication of economic recovery.

Pasha further stated that there was considerable decline in imports of raw material, adding the intermediary goods of textile input have declined by 10 percent in volume term, raw material of steel, 30 percent, and import of petroleum products contracted by 36 percent. Habib concurred that Dr Pasha's numbers were accurate but maintained that these were for the first quarter and of course if sales decreased in the first three month of current fiscal year, of course import of raw material was also squeezed.

The government has made progress to address the concerns of business community with regard to National Accountability Bureau (NAB) cases, sales tax refund bonds, fixed tax scheme for real estate sector, and axle load limit for transport sector.

On the issue of NAB, he said the government has the option to make changes in the law/rules or constitute a committee to review cases of business community and only those cases should be referred to the NAB on which consensus is developed in the committee meeting.

Copyright Business Recorder, 2019

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