KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) on Tuesday said Budget 2015-16 did not contain sufficient incentives to boost foreign direct investment (FDI), and large investments in the country.
Atif Bajwa, OICCI president said the budget included only marginal tax broadening measures. He said some proposals were likely to obstruct capital formation, which was essential for investment to drive growth.
“The planned GDP growth target of 5.5 percent is dependent on achieving growth of 6.4 percent in the manufacturing sector, 5.7 percent in services, and 3.9 percent in agriculture, which seems to be the right ambition, but is predicted on a number of assumptions, including increased level of investment in these areas,” Bajwa said in a statement.
The fiscal deficit target of 4.3 percent was also dependent upon collecting tax revenue of Rs3,100 billion, which was 19 percent over the revised target for 2014-15. “Considering the fact that targets for the past seven fiscal years have not been met, it would have given greater confidence to all stakeholders if specific measures for broadening the tax base across additional income groups and sectors would have been included,” he added.
Bajwa welcomed the proposed PSDP target of 700 billion, “provided it is invested fully in value adding infrastructure projects, which are direly needed for the growth of the economy”. He further said that “incentives for housing, agriculture sector, transmission lines, cold storage and Halal meat projects, as well as KP-specific incentives are to be applauded. However, incentives for KP should have been extended to the whole country”.
Considering the largely undocumented economy, measures announced in the budget for penalising non-filers cover only a small portion of the informal sector. The OICCI expectations for a robust and broad based legislation, that includes all income groups in the tax net
without burdening existing tax payers, have not materialised.
The statement said the chamber is somewhat dismayed that its recommended incentives under section 65 of the Income Tax Ordinance, critical for attracting large FDI and creating employment in the country were not entertained. The budget proposal also lacks measures to increase “Ease of Doing Business” concerns pointed out in the World Bank survey.
While the reduction of maximum custom duty to 20 percent may reduce cost of doing business in certain cases, it may also create incentives to import finished goods.
However, the incentives for exporters are quite timely and should lead to increase in exports, especially of value-added textiles. Similarly, incentives to the farming and housing sectors are positive for growth.