KARACHI: Business Community has expressed fear that cost of doing business will go up, exports will suffer and the poor segment of the society will face hardship due to increase in prices of almost all items and reducing purchasing power after approval of the mini budget.
Government has proposed to impose 17% Sales Tax worth Rs 343 billion on over 150 items as part of fiscal tightening measures aimed at winning funding from IMF. This indirect tax will directly affect the end user, escalate the cost of production and eventually increase existing inflation, says Ateeq Ur Rehman (Economic & Financial Analyst).
This is may be a step towards common proposal by Business Community to Government either to ban or impose heavy duties and taxes on the import of luxury items, luxury mobiles, luxury cars and confectionery in order to reduce the huge gap of import and export. But there are items and categories which need reconsideration on imposing sales tax like imported plant and machinery, pharmaceutical raw materials, food supplements, energy saver lamps / tube lights, cotton / sun flower / canola seeds, baggage of overseas Pakistanis.
He added that as a matter of fact, imported plant and machinery needs to be attracted being Pakistan a developing economy and it is not a trading item but a part of fixtures and fittings. We need plant and machinery for increasing our manufacturing and industrial capacities thus to meet the local market and exports.
The sales tax on import of pharmaceutical raw materials would lead to increase the cost of medicines and this incidence of Indirect tax will be ultimately passed on to the end consumers.
He said that we are contemplating to increase the production capacity of cotton / sun flower / canola and achieved a land mark of agriculture produce this year, these proposed imposing of sales tax will discourage the tremendous agricultural progress.
Taxing the food supplements, energy saver lamps etc baggage of overseas Pakistanis will add value to inflation and directly affect the consumers.
Acting President of Korangi Association of Trade and Industry (KATI) Farrukh Qandhari has rejected the government’s presentation of the mini budget, removal of 343 billion subsidies, and increase in taxes. He also expressed concern over the rise in prices of petroleum products. Farrukh Qandhari said that the mini-budget would not only destroy the industry but also increase the burden on the people. He said that instead of expanding the tax net, the government was increasing the burden on the existing tax payers they are already paying more than they can afford. On the other hand, the government has increased the prices of petroleum products, which will further increase inflation.
The Acting President said that in the past the government used to bombard the people with inflation but now prices of every sector are being increased. A few days ago the price of electricity was increased, then new taxes were imposed in the mini-budget and on New Year the people were given the gift of inflation by increasing the prices of petroleum products. He said that due to this situation it was becoming difficult to run the industry, there was a growing fears of closure of Industry and unemployment, which could lead to an increase in crime. Farrukh Qandhari said that instead of increasing the burden on the existing taxpayers, the government should increase the tax net and reduce the indirect taxes on the poor.
Vice President of Pakistan Businesses Forum (PBF), Ahmad Jawad said there is no doubt 2022 year is a challenging task for the country economy and the recent mini budget put new wave of inflation in the country.
He congratulates Irfan Iqbal Sheikh (President Elect) other office bearers of the FPCCI from the BMP and UBG groups to win the FPCCI 2022 Elections and said that the business community expect FPCCI leadership will paid its due role with the government to mitigate the inflation.
He further said the regular attempt of economic managers to impose new taxes and increasing oil prices along with the hike in power and gas tariffs will ultimately harm the government’s overall move of reducing the production cost for the businesses. Pakistan’s economic matters and dictations to the policy makers for taking harsh measures would add to the economic miseries of the country. It is very unfortunate that the government has given go-ahead to the economic team to fulfill all the required prerequisites for revival of the stalled program under $6 billion Extended Fund Facility, setting aside the miseries of the trade and industry. He said that the new taxes, in a bid to fulfill the IMF condition, will destroy the local as well as export industry that is already facing high cost of production.
Copyright Business Recorder, 2022