ISLAMABAD: The documented steel sector has claimed that the steel sector is not making any windfall profit margins and the Federal Board of Revenue (FBR) should avoid “targeted taxation” of this sector in the budget (2022-23).
In this regard, the Pakistan Association of Large Steel Producers (PALSP) has approached Asim Ahmad, chairman FBR, filing an appeal to save the steel sector from closure.
According to the steel sector, the International Monetary Fund (IMF) has asked the FBR for “targeted taxation on specific sectors” as a drastic measure to optimize the government’s revenues. It has been reported that the government has selected five sectors: banking, edible oil, tobacco, steel and beverages for ‘Targeted Taxation’ measures to increase revenues. These sectors have been chosen on the premise that these sectors have been making “windfall profits”.
As far as the long steel sector is concerned, there have been no “windfall profit margins” and the claim is misleading. The reality is that the net margins of the steel sector have shrunk during the last five years, and leading players declared losses during FY 2019-20. The steel sector came out of the crisis during the years 2020-21 and 2021-22 for a brief span of time. However, it has again landed into crisis after the drastic increase in interest rates during the first half of FY 2022 by the SBP.
Following factors have created a crisis-like situation for the steel sector: drastic increase in interest rates; unprecedented devaluation of Pak rupee; unprecedented increase in the price of scrap/raw material; unprecedented increase in the cost of fuel, energy; sale of tax-free goods produced in Fata/Pata in rest of the country coupled with smuggling.
The industry is ready to assist the FBR to support and suggest measures to augment the government’s revenues. However, we appeal the government not to resort to any unilateral decisions/measures that could result in the closure of our struggling industry, the documented steel industry added.
Copyright Business Recorder, 2022