Super tax: PBC says Pakistan taxing 'productivity and growth'

The Pakistan Business Council (PBC), one of the country’s largest business policy advocacy platforms, slammed the government’s recent measure of imposing 10% super tax for one year on the corporate sector, saying that the measure would "compromise sustainable growth" as exporters and employment-generating sectors will take a hit.

The government on Friday announced a 10% poverty alleviation tax or super tax on large industries in a bid to raise taxes to the tune of Rs400 billion, and meet the government's fiscal needs.

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The tax will be applicable on cement, steel, sugar, oil and gas, fertiliser, LNG, textile, banks, automobiles, beverages, chemicals, tobacco and airlines, taking the total of 13 sectors.

The announcement led to massive across-the-board selling at the Pakistan Stock Exchange (PSX), which lost over 2,000 points in less than 20 minutes between 11:40 and noon on Friday. The market settled at 41,051.79, still a fall of 1,665.18 points or 3.9%.

Responding to the development, the PBC in a series of tweets also cast suspicion on the government promises, while highlighting the government’s inability to introduce taxation reforms. “Based on the past history, here are some hard-to-believe promises made now in the budget: this is a one-time tax, and tax refunds will be made promptly."

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It said that contrary to government claims of alleviating poverty, super tax on industry is really to "support a bloated bureaucracy, high public expenditure, handouts to commercial importers and the trader vote bank, given FBR’s taxation capacity gaps and weak political will to broaden the tax base".

The advocacy body questioned the government on how taxing the already taxed would encourage broaden the tax base?

“Why would manufacturing grow when commercial importers enjoy full and final tax on under-invoiced goods?”

The PBC said that the government does not seem committed on introducing reforms in the Federal Board of Revenue (FBR), and thus resorted to “short-term, knee- jerk, front-ended revenue seeking measures to tax already taxed, which will compromise sustainable growth”.

The body, terming the super-tax as “retrogressive”, said those benefitting from the latest measures were importers, retailers, non-filers holding real estate, and big landlords in agriculture, while sectors creating employment and exports suffered.

Despite the unfair tax treatment, the PBC said that the corporate sector must continue to create jobs, promote exports and find ways to avoid unnecessary imports.