President American Business Council of Pakistan (ABC), Iqbal Bengali, stated that the Budget 2007-08 is pro-growth, which envisages among other things, a record development spending of Rs 502 billion. The budget addresses the common man's plight as minimum wage limit, old age benefit and government pensions have been increased.
ABC greatly appreciates government's consultative efforts to involve all Chambers and business forums in the budget preparation process. The Council had submitted its proposals to CBR in February this year and made a detailed presentation to Chairman CBR in March 2007.
As part of fiscal reforms, government has streamlined and simplified many of the tax procedures. ABC is of the view, that while significant progress has been made to-date in lowering overall tax rates on companies; however, opportunity still remains on Corporate & Welfare Taxes.
ABC's recommendation to reduce corporate tax rate and cap it at 30 percent would promote investment in Pakistan and encourage corporatization. It is hoped that moving forward the government would favourably consider a downward revision.
ABC in its proposal to CBR had recommended that the 5 percent Workers Profit Participation Fund (WPPF) and 2 percent Workers Welfare Fund (WWF) are additional corporate tax on income of manufacturing entities. However, the objective of WPPF & WWF is to benefit low-income workers, which is not being optimised. Furthermore, welfare taxes in Pakistan are amongst the highest in the region.
ABC's preferred proposal was to eliminate WPPF and WWF or alternately allow companies to utilise 100 percent of their contributions to build schools, hospitals and carryout other public welfare activities themselves to directly benefit the low-income employees. However, it is encouraging that the government has included contract employees and enhanced the wage limit as well as maximum limit of benefit to workers. ABC appreciates this as a step in the right direction.-PR
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