ISLAMABAD: Pakistan Business Council (PBC) has submitted proposals to Prime Minister Shehbaz Sharif to deal with current economic mess and restore fiscal prudence, stemming the pressure on foreign exchange reserves and revival of IMF programme.
Chief Executive, PBC, Ehsan Malik, in his letter while assuring full support in tackling the challenges facing the economy proposed that the government should withdraw the general subsidy on fuel, replace it with targeted assistance through BISP and avoid further populist measures that also result in increasing inflation.
PBC has recommended that Regulatory Duty (RD) on import of non-essentials should be increased, adding that as RD is impractical on fuel imports, limit import through conservation measures: (i) work from home; (i) early closure of commercial centres and wedding halls; and (iii) rationing of fuel for private vehicles. PBC has also suggested to the Prime Minister to not allow the country to experience the kind of challenges confronting Sri Lanka.
“Revive the IMF programme and secure bilateral and multilateral funding. Maintain a competitive exchange rate. Target REER in the range 95-105and avoid egoistic/unsustainable measures to prop up the PKR,” he added.
PBC maintained that exports be supported through continuation of regionally competitive energy tariff and other export incentives, suggesting the Prime Minister to consider additional incentives for non-textile exports and to widen the geographical dispersion.
PBC urged to implement an equitable taxation system, accelerate FBR reforms to broaden the tax base, pending which, increase the advance and withholding tax rates on non-filers and do not burden existing tax payers further. The body has suggested the government to avoid knee-jerk revenue seeking measures that impact the long-term health of the economy.
Ehsan Malik further proposed that the government review anomalies that arose from hasty changes to meet the claimed demands of the IMF: (i) multiple taxation of intercorporate dividends and other anomalies in group taxation;(ii) tax credits for investment; and (iii) other exemptions that still had time to run.
He suggested the government to phase down the inequitable minimum and advance taxes on the formal sector which raise the cost of doing business and liberate industry from legacies of past energy contracts, cross subsidies, system inefficiencies and theft and expedite additional LNG terminals.
In the letter to PM, the PBC has also recommended the Government to reinstate the relief on inter-corporate dividends as it was inadvertently treated as an exemption and withdrawn via the Income Tax (Second Amendment) Ordinance 2021. The relief is in line with established global practice of protecting inter-corporate dividends from multiple taxation and will promote the corporatization and competitiveness of local business groups in the global arena. At the same time, the withdrawal of inter-corporate dividend tax relief will disincentivize growth plans of existing business groups and discourage foreign investment in Pakistan as well.
Copyright Business Recorder, 2022