Members of the Finance Committee of the National Assembly have expressed serious concern over the rising trade gap whose ramifications on foreign exchange reserves and external account are creating serious balance of payment problems for the country. A meeting of the committee chaired by Qaiser Ahmed Sheikh was held on Wednesday to discuss the updated status on its recommendations to the government with regard to suggestions received from various stakeholders.
The meeting was flatly annoyed over the government for not accepting their proposals in the finance bill. During discussion on the proposals, Nafeesa Shah pointed out that warning on balance of payment challenges is coming from multilaterals. She said that all this is happening because of rising trade gap due to China-Pakistan Economic Corridor (CPEC).
She said that Chinese companies have been allowed exemption in taxes and duties, as opposed to local industry, on import of raw materials for CPEC projects at the cost of local industry. Another member said that local industry has become disadvantageous due to government agreements with regional countries after the local cable industry approached the committee seeking support for the similar treatment to them that was allowed to the Chinese companies.
The representative of local cable industry stated that the government had allowed import of cable at zero duty and sales tax to Chinese companies for CPEC and power projects. As a result, local industry cannot compete with them and wants zero duty and sales tax for the same projects so that it can compete with Chinese companies. They also claimed that import of cable increased by 70 percent during last year. The committee agreed that local industry's difficulty was legitimate and decided to convey to the government in the form of recommendations.
Earlier, as the meeting started, Asad Umar pointed out that none of the recommendations of the committee was included in the finance bill and stated, "We need to pass a resolution that committee's proposals are not accepted by the government. A law is needed to make binding on the government to accept committee's recommendations for the budget."
Most of the committee members were of the view that committee has become ineffective because its budget proposals are not accepted by the Finance Ministry and the Federal Board of Revenue (FBR). Minister of State for Finance Rana Muhammad Afzal assured the committee that he would do whatever possible in the Anomalies Committee to narrow down the difference in tax for commercial importers and industrial importers, as the committee wants the WHT for commercial importers to be reduced to 4 percent from 6 percent and for industrial importers WHT be increased to 2 percent from existing rate to prevent misuse of the raw material import. The minister also assured the committee that the government will increase the cost of cigarettes in the coming days in order to discourage the use of tobacco.
The committee discussed the proposals of All Pakistan Cables & Conductors Manufacturers Association and once again recommended to the Federal Board of Revenue (FBR) that differential of income tax between commercial and industrial importers be reduced. The committee recommended that industrial importer at import stage for raw material falling under chapter 25 to 55 should be charged @2 percent WHT adjustable and no exemption certificate will be issued to industries. The commercial importers importing raw material under Chapter 25 to 55 will pay 4 percent WHT as full and final.
The committee recommended to the FBR to arrange a meeting with the stakeholders of industrial and commercial importers at the earliest. The committee recommended that suggestions received from real estate, construction sector and Pakistan Automotive Manufacturers Association (PAMA) may be forwarded to the FBR for favorable consideration.