LAHORE: To address the issue of tax collection, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh has urged the federal government to carry out comprehensive tax reforms aimed at increasing the tax base and simplifying the tax regime.

“Underperformance of tax collection has led to a reliance on indirect taxes and external borrowing,” he said while addressing a pre-budget conference, which was jointly organised by the FPCCI and ‘Business Recorder’ at a local hotel on Sunday.

While sharing some insight on the FPCCI’s budget proposals for the fiscal year 2024-25, he said that at the heart of their proposals lies a commitment to creating an enabling environment for investment and sustainable growth. “We recognise the significance of a more equitable and sustainable tax system and advocate for reforms that simplify the tax structure, promote compliance, and stimulate economic growth. By broadening the tax base and rationalizing tax policies, we aim to create a fairer playing field for businesses while ensuring that the burden of taxation is distributed equitably across society,” he added.

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Talking about the ongoing engagement with the International Monetary Fund (IMF), he said that it has been instrumental in stabilizing our economy; however, while these programmes provide essential financial support, they also impose constraints and necessitate stringent policy measures. “Hence, our budgetary policies must strike a delicate balance between meeting the IMF requirements and addressing our domestic economic needs,” he said, adding: “The pressing issue of sales tax refund delays has severely impacted the cash flows of businesses, particularly in the manufacturing sector.

We suggest the appointment of a designated officer to oversee and expedite the refund process, ensuring that businesses have the liquidity necessary to maintain operations and investments. We emphasize the urgent need to address the issue of energy costs in Pakistan, which continues to pose a significant challenge to businesses and economic growth.“

He highlighted the significance of privatization as a means to enhance efficiency and stimulate economic growth. He also talked about the recent commitment of Saudi Arabia to invest US $8 billion in Pakistan, which, in his opinion, was a testament to the potential of foreign investment to catalyze economic development and job creation.

He welcomed the establishment of the Special Investment Facilitation Council (SIFC), saying this would play a pivotal role in attracting and facilitating investments in various sectors. “We were committed to working closely with the government and all stakeholders to ensure that these proposals were implemented effectively, recognizing that the prosperity of Pakistan’s economy is inextricably linked to the well-being of its people,” he added.

He observed that our efforts must go beyond fiscal measures; we must also invest in our human capital, improve our infrastructure and foster innovation to ensure that Pakistan can achieve its full potential. “By doing so, we can build a brighter future for all Pakistanis, one in which our economy is not only resilient in the face of global challenges but also capable of providing the opportunities and living standards that our people deserve,” he added.

Meanwhile, Pakistan Hi-Tech Hybrid Seed Association (PHHSA) Chairman Shahzad Ali Malik touched on the importance of the agriculture sector, saying it was the backbone of the economy with a 24% contribution to GDP and accounts for half of the employed labour force and is the largest source of foreign exchange earnings.

He continued that among the five major field crops cotton, wheat, rice, maize and sugarcane, only two crops producing surplus for exports were rice and maize; rice exports will cross US $ 3 billion and maize US $400 million this year with continuing growth in production with the help of high-yielding hybrid seed.

He averred that Pakistan was currently importing wheat, cotton, edible oil and pulses worth US $ 9-10 billion and the PHHSA members were actively engaged in import substitution through research and development and local production of hi-tech and hybrid seed of cotton wheat, oilseeds and pulses to reduce the import bill within next 5 years.

He pointed out that seed was the backbone of agriculture and thus its local production needs to be promoted. “However, according to news in the Business Recorder and other papers on May 10, the FBR under the recommendations of the IMF was considering withdrawing sales tax exemptions granted in 2023-24 on agriculture tractors and pesticides and considering imposing sales tax to generate further revenue of Rs30 billion.

We request the government not to levy this sales tax on these essential inputs of agriculture to avoid a negative impact on the crop yield and adding burden to poor farmers. This may not yield positive results and adversely affect our efforts of enhancing per acre yield, exports and import substitution,“ he added.

While giving an overview of the sugar industry, Muhammad Rafiq, a representative of the Pakistan Sugar Mills Association (PSMA), said that this industry has the potential to generate exports of USD 3 to 4 billion annually (sugar plus ethanol) after meeting the country’s domestic requirements provided it is completely deregulated.

“The sugar industry was massively over-regulated by the federal and provincial governments; whenever there was a surplus sugar production in the country, there was no proper mechanism to assess this surplus and subsequently, take timely decisions for exports. In the past, the country lost huge foreign exchange due to late and inadequate export permissions given by the federal government,” he said.

He pointed out that Pakistan has the lowest per-acre yield of sugarcane and the provincial governments do not provide any support to eliminate non-variety sugarcane; in fact, support was provided to the farmers to sell their low-quality sugarcane to the millers causing heavy production losses to the millers.

He further said that in the recent past, the sales tax rate has been increased on sugar from 8 percent to 18 percent. “If sugar was so essential then there should be no sales tax on it.

Interestingly, sugar was the only consumable item from agricultural produce on which the government charged 18 percent sales tax, which is the highest in the world, whereas there was no sales tax on rice, wheat, flour, maize, vegetables and fruits.

The sales tax rate on the same commodity in our neighboring country, India, was 5 percent. We demand that the FBR should reduce the sales tax from 18 percent to 5 percent to make this commodity cheaper for the general public,“ he added.

He averred that there has been no incentive in the country to produce more sugar over last year and thus the PSMA suggest that a 50 percent rebate on sales tax should be allowed on excess production as compared to last year.

Copyright Business Recorder, 2024


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