The National Assembly on Wednesday passed "The Finance Supplementary (Second Amendment) Bill, 2019" to amend the tax laws, allowing non-filers to purchase locally manufactured vehicles irrespective of engine capacity amid protest and walkout by the opposition parties.
The government allowed new tax incentives on import of plant and machinery by green field industrial undertakings and units in Special Economic Zone, exemption from advance tax on profit paid on Pakistan Banao Certificate, Sarmaya-e-Pakistan Limited and Duty Drawback Bonds and exemption in tax liability for inter-corporate dividend for company availing group relief.
Through amendments, the government has established FBR Refund Settlement Company (Pvt) Limited for issuance of sales tax refunds through Promissory Notes or bonds by FBR. The Bonds will have maturity period of three years with annual simple profit of 10 percent, as these bonds can be freely traded in the country's secondary market.
In order to provide further incentive to the industrial undertakings set up in the Special Economic Zones, exemptions from customs duty and advance income tax on import of firefighting equipment have been given. Moreover, import of plant and machinery by green field industrial undertaking has been proposed to be exempt from customs duty.
In the Finance Supplementary (Second Amendment) Bill, 2019, a 10% federal excise duty was proposed for locally manufactured motor vehicles of engine capacity of 1800 cc and above. However in order to address the concerns of local manufacturers of motor vehicles, the engine capacity is proposed to be revised to 1700cc.
The government has further streamlined incentives for banks on advancing loans for agriculture, low-cost housing and micro, small and medium enterprises.
The government has also reduced/abolished customs duty on the import of 45 industrial raw materials and inputs including zero percent duty on the import of latex, adhesive tape, evaporators and machinery for preparing, tanning or working hides, skins or leather and machinery for making/repairing footwear.
Finance Minister Asad Umar was inaudible during clause by clause reading owing to a noisy protest right in front of the speaker's dais. He stated in his windup speech after the opposition stormed out of the House that "this is not revenue mobilisation bill but an incentive package for industry, trade and business." He stated that he would like to respond to the points raised by the leader of opposition and parliamentary parties' leaders on the Finance Supplementary (Second Amendment) Bill, 2019.
The finance minister said the government welcomes the proposal of the leader of the opposition that all the political parties should sign a 'charter of economy' but added that opposition has been doing point-scoring on the economy and has not given any concrete suggestion how the government should deal with the economic crisis it inherited.
The minister said the leader of the opposition raised the question of loans procured by the government as well as increase in inflation, growth etc and added that Pakistan Muslim League (Nawaz) government met the debt servicing obligations in 2017-18 by borrowing. The previous government left the economy in a very bad shape for its successor government and now it is criticizing the present government for every thing.
The Minister said the present government was also criticized on inflation but a comparison of the first six months of the three governments - Pakistan Peoples Party, Pakistan Muslim League (Nawaz) and Pakistan Tehreek-e-Insaf (PTI) - shows that increase in inflation during the six month of present government was 3 percent as opposed to 10 percent and 10.9 percent during the first six months of PPPP and PML-N governments, respectively.
Umar said that average GDP growth during the five years of the PML-N-led administration was 4.5 percent, and stated that the GDP growth in the first year of PTI would be higher than PML-N's average growth.
The finance minister said foreign direct investment (FDI) becomes nothing during the tenure of the previous government if the China-Pakistan Economic Corridor (CPEC) inflows are excluded, adding investment decline in FDI during the first six months was not 70 percent but it was 17 percent, while portfolio investment which dipped during the PML-N tenure has started showing signs of improvement during the first seven months of the present government.
The finance minister further stated that projects lending was suspended by the World Bank (WB) during the tenure of previous government due to decline in foreign inflows below the required level of covering two-and-a-half-months' import bill.
The minister said that PML-N government increased the external debt from $61 billion to $95 billion during the five years tenure and added $34 billion to the debt stock. He further said that State Bank quarterly report cited by Ahsan Iqbal was for the period of caretakers and PML-N administration and not for the PTI's tenure.
Umar said that PML-N government had approached the International Monetary Fund (IMF) within two months after assuming the office despite the fact that net international reserves (NIR) and current account deficit were much better compared to what was left by them, adding the NIR level in the country was 10 percent higher and current account deficit was significantly low. He said the PTI government inherited a very bad economic situation and stated that IMF programme would be taken only on the conditions that are in the best interest of the country.
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