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June 12, 2019

Businessmen term new budget bad omen for industrialisation, people

Business

June 12, 2019

KARACHI: Business leaders on Tuesday dubbed the federal budget 2019-20 as unfriendly for businesses and masses both, and said it would adversely impact industrialisation in the country and trigger mass protests.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Senior Vice President Mirza Ikhtiyar Baig said, “We will comment better once all the details are shared. But by the measures announced in the minister’s speech, including elimination of sales tax zero-rating for the five value-added export sectors, we are convinced it will not bode well for the economy.”

Baig said that despite the FPCCI recommendations and meetings with the authorities concerned, the government has withdrawn zero rating for export-oriented sectors.

“This is the last nail in the coffin; exports would nosedive and there would be no industrial expansion,” he predicted. United Business Group (UBG) Chairman SM Muneer said everything had been taxed, which would significantly increase cost of production leaving made in Pakistan goods uncompetitive in the international market.

“Around Rs400 billion of refund claims are already stuck-up, and these would multiply after withdrawal of the zero-rating sales tax regime, as the government has no money to refund. There is going to be unprecedented liquidity crunch for the industry.”

Muneer said the PTI government had re-launched the federal excise duty (FED) regime, as duty in the range of 2.5 percent to 17 percent has been imposed on almost everything.

FPCCI Vice President Khalid Tawab said the minister in his speech hinted that inflation would be controlled through monetary policy, “which suggests the central bank would increase interest rates further. If so happens, the industry would close down and there would be high unemployment.”

Tawab said duties had been increased on a large number of importable goods without any measures to curb smuggling. “Legal imports would decrease, and smuggling would surge manifold,” he added.

Vice President FPCCI Arshad Jamal, representing commercial importers and customs agents, said imposition of duties on finished products such as shoes, garments, blankets etc would result in higher inflation, and all these goods, which were being legally imported would be smuggled, hence depriving the government of revenue.

The business leaders were unanimous that the budget was not friendly for the business, and announced to register their protest without teaming up with any political party.

The leadership of the Karachi Chamber of Commerce and Industry (KCCI) said duty and taxes had been imposed across the board to achieve an unrealistic revenue target of Rs5,550 billion.

Former president of KCCI and Businessmen Group (BMG) Chairman Siraj Kassem Teli said that the Rs5,550 billion tax collection target for the Federal Board of Revenue (FBR) was over-ambitious.

“The government imposed duty and taxes on all sectors of the economy to collect additional revenue of Rs1,500 billion,” he added.

On one hand the prime minister and his cabinet claimed the budget would not affect the common man, while on the other hand taxes have been imposed on sugar, cement, edible oil, steel, CNG etc. “All these things are consumed by the common men,” Teli pointed out.

He said that with these increases in taxes, rise in inflation would go beyond control. “The abnormal increase in prices will increase the cost of living due to increase in tax rates,” he added.

Teili feared that the massive increase in prices would compel masses, including public and industry to come out against the government.

“Imran Khan before becoming Prime Minister had announced to collect Rs8 trillion as tax revenue. The present budget is reflecting his ambition without realising the effect on the general public,” the BMG chairman said.

Instead of identifying new avenues for generating revenue, the government has burdened the existing taxpayers.

Teli said freezing the defence budget was a good step, and so was the decision to not increase salaries of grade 21-22 bureaucrats and ministers.

Zubair Motiwala, another business leader, said the government had planned to further dent existing exports by abolishing sales tax zero-rating. Billons of rupee of sales tax refunds were stuck, and by abolishing zero-rating the refund claims would further increase.

Haroon Farooqi, former president, KCCI said the budget was not for public, but was the manifesto of the Pakistan Tehreek e Insaaf (PTI) to increase revenue at any cost.

Farooqi, however, welcomed the government initiative to eliminate presumptive tax regime. He said that the government had take measures on the income tax side, but overall, it was a sales tax oriented budget.

KCCI President Junaid Makda termed the budget IMF dictation. He said thebudget speech was not a true reflection of the actual measures taken by the government. It would appear gradually and people would realise its intensity and harshness.

He said that the government claimed that the defence budget was frozen, but in fact it was increased by 16 percent.

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