Proposed Punjab IDC may increase cost of production

The proposed Punjab Infrastructure Development Cess (PIDC) is likely to increase production cost which may have negative impact on government efforts to increase exports to EU under GSP plus The Punjab government has announced in the budget 2014-15 that a separate legislation would be introduced to impose PIDC.
This tax will be levied on goods destined for exports or items imported and passing through the limits of the Punjab province. While talking to Business Recorder, former Punjab Finance Minister Tanvir Ashraf Kaira, said the Sindh government has already levied such a road cess on all goods transported to other parts of the country. He said the Punjab government might be trying to impose road cess which would mean that both exporters and importers would pay an additional tax and as a result their cost of productions would go up. Kaira opposed the new cess, saying that it would affect business in all provinces, which is already facing difficulty due to energy crisis.
An official of Finance Ministry on condition of anonymity said, "Cess is a provincial issue and the federal government can not interfere after the devolution of responsibilities to them under the 18th constitutional amendment. However, he said the federal government encourages an increase in provincial taxes which at present is very nominal". Ibrahim Mughal, President Pakistan Agri-Forum (PAF) said the proposed PIDC will badly affect the agriculture sector's exports by making their products expensive. The tax may also impact negative on the agriculture output and consequently would have negative impact on overall growth.
Ibrahim also criticised the government for allocating 1.4 percent of total budget for agriculture that contributes 24 percent to GDP. Acting President Lahore Chamber of Commerce and Industries Mian Tariq Misbah told Business Recorder that the chamber is opposing all new taxes which would have a negative impact on businesses and industrial growth in the province. He recalled that during a pre-budget seminar, Punjab Finance Minister visited the chamber and assured the business community that no new tax would be imposed.
Misbah further said that around 70 percent of business taxes are collected in Punjab, but the Punjab government has given no relaxation to the business community in the budget 2014-15. He said the chamber would take up the matter with the Punjab Finance Minister in an upcoming meeting.
An official of the Punjab government, however, argued that the cess would be utilised for maintenance and repairing of roads. Accordingly, the cess, at present, is being charged on imported goods which enter the province of Sindh from outside. The rate of the cess was raised from 0.80 percent to 0.85 percent in 2008 and presently, the rate of cess stands at 0.90 percent to 0.95 percent.