Top investors have expressed serious grievances and frustration over taxation anomalies regarding Special Economic Zones (SEZs) during a meeting with Adviser to PM on Commerce, Textile, Industries & Production, and Investment, Abdul Razak Dawood Wednesday.
A delegation of domestic investors of Bin Qasim Industrial Park and Korangi Creek Industrial Park called on Razak Dawood to discuss various issues pertaining to taxation anomalies regarding SEZs. The meeting was also attended by FBR Chairman Syed Shabbar Zaidi and BoI Chairman Zubair Gilani.
Investors representing 40 industrial units with a total investment of Rs 70 billion expressed their serious grievances and frustration on the applicability of 1.5 percent minimum turnover tax on their sales revenues.
The investors were of the opinion that BoI marketed the SEZs as being free from all taxes on income. However applicability of turnover tax at 1.5 percent of sales revenue effectively assumes each SEZ enterprise is taxed at a net profit of 5 percent of sales. Especially, of concern to the investors was the fact that SEZ projects are highly capital intensive due to which they accrue losses for at least 2-3 years but turnover tax would have to be paid which is a source of frustration to the SEZ investors.
The advisor and chairman FBR were receptive to the impact of turnover tax. The investors appreciated the efforts being made by the advisor and CEO NIP to provide infrastructure to the two SEZs in Karachi and assured the government that removal of minimum turnover tax will greatly boost SEZ investments in the country which is critical for job creation through import substitution and export promotion.
The adviser to the PM highlighted the tax incentives provided to SEZs. These incentives include onetime exemption from customs duties and taxes on import of plant and machinery into SEZs for installation in these zones. Moreover, he added that the government has also given tax holidays for 10 years to all enterprises which will commence commercial production by 30th June 2020 in SEZs.
The adviser emphasized that, beside tax incentives, incumbent government has taken strategic decision to facilitate investors by providing state-of-the-art infrastructure in SEZs so that they can contribute in the national economy by kick-starting commercial production at the earliest.
During the meeting, the investors raised issues relating to timely issuance of tax exemption certificates from FBR which are causing inconvenience and delays in taking investment decisions by the new investors. In order to address this issue the chairman FBR apprised the participants that he will nominate a dedicated focal officer in the FBR who will coordinate with the investors to resolve any issue being faced in their investment ventures.
The adviser urged the investors to invest in SEZs in the priority areas which include textile, food processing, IT & IT equipment, logistics and automobiles in order to get high returns on their investment. He also assured facilitation to the investors from BOI, as the lead coordination agency of the government of Pakistan. He stated that all the issues pertaining to taxation of various projects would be resolved and BOI would act as a single bridge between the investor and the government departments including the FBR.