KARACHI: The slapping of 10 percent super tax on industry, already under disproportionate burden, is retrogressive, while contribution of low-investment agriculture/trade to revenue collection remains paltry, Pakistan Business Council (PBC) said in a reaction to the super tax in a series of tweets.
Pakistan imposed an extra one-time 10 percent tax on large-scale industry for one year to raise over Rs400 billion ahead of a deal to resume crucial funding from the International Monetary Fund (IMF).
“What makes it worse is that it is retrospective,” the business body said. “How is taxing the already taxed going to encourage more to join the tax base? Why would manufacturing grow when commercial importers enjoy full and final tax on under-invoiced goods? How will we balance the current account?”
The super tax will be levied on 13 big sectors, including sugar, steel, cement, oil and gas, fertiliser, cigarettes, chemical, automobiles, banks, textile, LNG terminals and beverages.
The PBC raised these questions, while casting some serious doubts on the utility of new tax and the government’s commitment to ensure the taxpayers rights.
It said based on the past history, the promises like ‘this is a one-time tax’ and ‘tax refunds will be made promptly’ were hard to believe.
The PBC said neither the government nor the IMF committed to fundamental reforms of Federal Board of Revenue's capacity to tax. “Hence short-term, knee- jerk, front-ended revenue seeking measures to tax already taxed, which will compromise sustainable growth. No innovation. Pure expedience.”
Highlighting the flaws and the bias of the budgetary measures, the business body asked: "who were the actual beneficiaries of the budget?"
"Commercial importers spared full tax accountability, retailers levied mild taxes, non-filers holding real estate, big landlords in agriculture. Whose vote bank are they? Who suffered? The ones who are creating employment and exports,” the PBC said.
The forum said the industry still could take solace in helping Pakistan restore its solvency and autonomy. “Notwithstanding unfair tax treatment, it must continue to create jobs, promote exports and find ways to avoid unnecessary imports,” it said.
The PBC asserted that contrary to claims of alleviating poverty, super tax on industry was in reality imposed to support a bloated bureaucracy, high public expenditure, handouts to commercial importers, and the trader vote bank, given FBR’s taxation capacity gaps and weak political will to broaden the tax base.
“Can the finance minister ensure that all pending tax refunds and rebates are settled on July 1 to live up to the promise of his budget speech?” the PBC questioned and added that it would be a great start to restore business confidence especially of those affected by super tax. "Let’s make a fresh start."
It said the impact of super tax on listed companies with external shareholders - pensioners, retail investors etc, was that for every Rs100 pretax profit, assuming full dividend payout, the state would now get Rs52 and the shareholder Rs48. “Not a fair risk/reward ratio,” the business forum said.