FPCCI asks govt to eliminate irritants to boost growth

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) demanded of the government to eliminate irritants, faced by manufacturing and export sectors, to accelerate GDP growth rate to seven percent.

“Seven percent GDP growth rate is must to provide employments and for reducing poverty level in the country,” the apex trade body said in its proposals, presented to the Standing Committee of National Assembly on Finance and Revenue.

The FPCCI sought reduction in general sales tax (GST). “It is necessary to provide relief to common people and (for) poverty alleviation,” it said.

At present, the nominal average GST rate is greater than 17 percent, while data of the Federal Board of Revenue (FBR) suggests that the effective rate of GST is less than five percent. “It indicates that a large part of GST collection is lost to exemption, corrupt practices and refunds,” the FPCCI said.

It said delay in refunds to the exporters created a severe liquidity crunch in the export-oriented sector. “More than Rs200 billion (in stuck refunds) of the business sector, particularly export enterprises, has slowed down the activities,” it added.

The national chamber said there are 150,000 retail shops in the country, but an aggregate collection of tax from those shops was only one billion rupees. 

“The collection of tax from retailers shall be based on progressive system. For this purpose, different slabs for collection should be created to collect tax from the shops according to their size and location,” it added.

The FPCCI said there is no law for the unscrupulous tax collectors for issuing unnecessary notices and misusing the discretionary power. “Equity and justice demand that like a taxpayer the tax collector should also be penalised for misusing discretionary power.”

According to the proposals, the corporate tax rate in Pakistan is much higher than the regional economies. The FPCCI said the objective of a recent amnesty scheme would not be achieved as the scheme is not applicable on industrialists.

Though Pakistan succeeded in getting generalised scheme of preferences (GSP) plus status from the European Union, its benefits are not visible in the country’s trade statistics. “(Due to) bad governance and lack of quality assessment and infrastructure, the potential of exports to EU is not optimised,” the FPCCI said.

The devaluation of Pak Rupee against the U.S. dollar has created problems at social and economic fronts. The apex trade body said two-third of Pakistan’s imports consists of basic commodities, including oil, pharmaceutical items, food and edible oil. 

“The devaluation of currency will increase the domestic prices of these items,” it said. The determination of long-term and sustainable exchange rate is always from the balance of payment.

“The short-term measures, including intervention by the State Bank of Pakistan, policy statement and administrative controls cannot replace the requirement of economic policy,” it added.

“Focus should be on enhancement of exports and inflows of foreign investment, particularly foreign direct investment.”

The national chamber said the present banking system is encouraging commercial banks to invest the depositors’ money in treasury bills. “Instead of financing the budget deficit through treasury bills, authorities should device mechanism to mobilise bank deposits towards industrialisation in the country,” it added. “Preferably, the banks should give a priority to the small and medium enterprises and provide them loan without collateral.”

The FPCCI advised that banks should open branches in the countries with which Pakistan signed free or preferential trade agreements to facilitate exporters.

It said the government announced privatisation of the state enterprises with an objective to reduce fiscal deficit. “Privatisation funds should be used for debts and servicing reduction,” it added. “This step will cut the government expenditures.”