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Tuesday March 19, 2024

PBC calls for deferral, one-time remission of taxes, levies

By Our Correspondent
April 09, 2020

KARACHI: Pakistan Business Council (PBC) on Wednesday proposed the government to allow deferral or one-time remission of taxes and levies to create liquidity and means to sustain the livelihoods of lower paid employees.

PBC said its business relief program sought no large handouts and recognised the responsibility of business to sustain employment, in line with the government’s objectives.

“The package is also drawn in the belief that IMF (International Monetary Fund) and other multilaterals will look at Pakistan in a more accommodating manner now than earlier,” PBC said in a statement. “These suggestions were justifiable even before the coronavirus crisis but become more relevant now.”

The council said its members recognise the need to put ‘people before profit’ and would continue to nurture employment for as long as they can. “However, Covid-19 is an unprecedented crisis and no one can forecast its economic impact with much accuracy.”

The PBC advocates that instead of incremental steps with diminishing effectiveness, a proactive and holistic approach should be adopted to strengthen the basis of the private sector’s ability to continue to sustain jobs, promote value-added exports and enhance import substitution.

“A positive outcome of the Covid crisis is a renewed recognition of the importance of a large 210 million plus domestic market and a reaffirmation of the potential of the agricultural sector,” it said.

“Another positive is the confirmation of the role of well organised, adequately resourced, law-abiding and fully documented sector. Hence, (there is) need to shape policies that promote the growth of the formal sector.”

PBC said businesses together account for only 20 percent of the 10.6 million people in formal employment in the country. The small and medium enterprises, which are not as well-resourced, employ the overwhelming 80 percent of the formal workforce. Moreover, the majority – 38 million of non-agriculture workers – are in the informal sector, which is likely to be impacted the most.

“Even for strong businesses, there are limits to the extent and time they can continue to fund payrolls and meet other fixed costs, if they remain shut and their cash flow is constrained,” it said. “In this background and to ensure that stakeholders plan proactively to secure employment, sustain economic activity and establish a sounder basis of reviving tax revenues, PBC recommended a business relief programme.”

PBC said the non-cost push inflation was recorded at just 5.2 percent of the March consumer price inflation of 10.2 percent. It said policy rate is not an appropriate tool to address supply side issues affecting availability and price of agricultural produce.

“Hence 11 percent policy rate is neither the right medicine not the correct dose. With lockdown and depressed economic conditions, the inflation outlook is lower than 5 percent,” it said.

“The rationale for holding borrowers – government and the private sector – hostage to high rates to sustain carry deposits no longer exists. Foremost, the country cannot afford high borrowing costs. Piecemeal subsidies to certain class of borrowers lack general impact. Costs need to be reduced across the board.”