The Employers' Federation of Pakistan (EFP) has urged for broadening the tax base, lower cost of doing business and simplify tax procedures for long term economic development.
Economic Council (EC) of EFP on Thursday presented proposals for the next budget 2019-20. These budget proposals have also focused the circular debt crisis and presented a suitable solution to the government to overcome from this long standing issue. While, the industry specific proposals of EFP include input from multiple sectors and address their budget related concerns.
Addressing a press conference here on Thursday at Karachi Press Club (KPC) Majyd Aziz President EFP informed that the Economic Council of EFP in its first ever endeavour initiated pragmatic, doable, and workable solutions to the various economic and financial issues impeding the economic growth and prosperity of Pakistan.
Employers' Federation of Pakistan is a well-reputed private non-profitable entity, which rightly established firm roots into the heart of all major economic activities that unfold the economy.
He said that the proposals have been formulated after intensive deliberations and discussions with stakeholders and after consultations with legal and economic advisors. EFP is certain that the economic policymakers of the government would accord positive consideration to these proposals, he added.
Ismail Suttar Chairman EFP-Economic Council highlighted the salient features of the proposals and said that the section discussing broadening of die tax base includes recommendations which include utilisation of NADRA's data to identify potential groups who are not under the tax net.
It also contains suggested incentives to encourage NTN registration and rewards for filing returns. It also includes the need for enforcement of agriculture tax and retail tax, he added.
He said that the simplification of tax laws is discussed which include several procedures that can be consolidated, eliminated, and simplified. The backlog of refunds and the issue of deferred claims, which have become a serious operational issue for many corporations, are also discussed in the budget proposal to be submitted to the federal government this week. The problems with Withholding Tax and exemptions are also mentioned in the proposals, Suttar informed.
For the cost of doing business, tax procedures and laws which need an adjustment and which can lead to an improvement in the business activities including the promotion and growth of SMEs have been highlighted.
"The Economic Development proposals provide input on how the government can finance die debt with the domestic context through sustainable investment, and measures for Federal Board of Revenue (FBR) to further improve its quality of work through research and development," he said.
Zakaria Usman Chairman Budget Advisory Committee said that a comprehensive exercise was attempted to bring into focus the solutions to the economic challenges and difficulties that have been experienced by Pakistan.
EFP's budget proposal emphasis on broadening of the tax base, reducing the cost of doing business, solving the circular debt crisis, and reforming the existing tax regime that are imperative and must be addressed at all costs.
Elaborating further on broad issues, Ismail Suttar and Zakaria Usman proposed that for broadening the tax base, a single-digit sales tax be imposed on the non-traditional inputs and government should coordinate with provincial revenue authorities to recover lost revenue.
Moreover, in the retail sector, a sales tax of up to 7.5 percent on electricity bills of unregistered retailers be imposed along with issuance of 'Common Tax Identifier' cards to promote tax filing. Lastly, a formula for determination of true market value of real estates be forthwith devised and proceeds from loss-making public enterprises be used to revive sick units, they added. For simplification of tax procedures, they proposed that all deferred refunds of export-led industries be cleared without any pre-auditing. It is also imperative to establish a one-tax authority at federal level and segregate the tax machinery from judicial influence to maintain impartiality. Finally, commercial exporters should be excluded from further sales tax, including withholding tax on locally manufactured vehicles, they added.
While, discussing the reducing the cost of doing business Ismail Suttar and Zakaria Usman said that to suppress the existing liquidity crunch faced by exporters, DTRE should be fast-tracked and all sectors with exempted output be declared zero-rated.
"Moreover, we demand turnover be reduced to 1 percent, manufacturing companies be permitted to claim input sales tax on office materials and installed plants and machineries be allowed to carry-forward tax credits up to 10 year," they added.
Similarly, in order to promote culture of import-substitution, regulatory duties on foreign-made inputs be gradually curtailed, they proposed.
For resolving the circular debt crisis, Ismail Suttar proposed commoditising electricity in the form of futures and hence and creating a wholesale electricity market in Pakistan.
In Industry Specific Recommendations segment woes of major industries such as textile, steel and automobile along with their solutions are highlighted, he informed.
He said that Pakistan has lost many years in experimenting with ad hoc measures to pop up the economy. Most of these proposals have not worked in real-time basis, and it is imperative for the economic policy makers in this government to consider and adopt the proposals forwarded by the private stakeholders.
For circular debt, Suttar proposed that government should commoditise the electricity market in the form of futures. Any electricity generated in excess can be sold in the form of futures which can be bought and traded by people and they can be used to finance investments by the government, he added.
"These energy futures can be traded in Pakistan Stock Exchange (PSX) and the investors will be required to hold these bonds for at least one year. In addition these bonds should be issued at 10 per cent markup and this amount to be treated as dividends and the income will be subject to tax applicable on dividends. While, these bonds can be pledged with the financial institutions for financing," he suggested. Speakers said that these budget proposals would surely scale Pakistan in the higher echelon in the community of nations and the country's economy will achieve long term economic growth in coming year. On the occasion Shahid Ahmed, Zeeshan Merchant, Abdullah Ali Khan economic coordinator EFP and research team members of the Economic Council were also present.