KARACHI: Lockdown-racked traders urged the government to formulate a comprehensive incentive package covering all economic sectors instead of one or two to channel enormous capital in informal sector into the mainstream economy.
The Karachi Chamber of Commerce and Industry (KCCI) said benefits of concessions granted to one or two specific sectors would neither reach the majority of trade and industry nor provide relief to common man.
“In the present extraordinary circumstances, it is necessary to provide across the board incentive package for investment in all sectors of trade and industry, and the SMEs (small and medium enterprises), which have a major contribution to GDP and tax revenues,” Agha Shahab, president of KCCI said in a letter to the Prime Minister Khan.
Shahab appreciated the special incentive package for construction industry announced last week, which he said has been widely welcomed by the business community, particularly those associated with the construction industry.
KCCI demanded a special incentive package for all sectors of industry and small and medium enterprises.
The chamber with 22,000 members said the black economy in Pakistan is twice the size of documented economy and due to the present coercive tax regime and laws a very large amount of capital is blocked in idle investments. In view of the prevailing global economic crisis and its negative impact on Pakistan, it is essential to release the blocked capital and encourage investments into productive economic activities such as industry and trade.
“We, therefore, propose to formulate an across the board incentive package encompassing all sectors of economy,” Shahab said.
KCCI proposed the government that no questions should be asked for all investments in capital goods, raw materials, premises, acquisition of land and building for industry up to 30th June, 2022. General sales tax should be brought down to nine percent from 17 percent. Withholding tax on all supplies by manufacturers and traders should be reduced to two percent from existing 4.5 percent. Policy rate needs to be brought down to seven percent in line with other countries to stimulate the economy.
KCCI called for removal of anomaly in withholding tax rates on import of raw materials by industry and commercial importers and apply flat rate of two percent on both to support small and medium enterprises. There is a need to refinance the deferred import bills, which are due for payment through banks at five percent mark-up.
Many countries have taken initiatives to support their economies and announced incentive packages worth trillions of dollars to bail out the businesses which are going to suffer due to recession triggered by COVID-19 pandemic. Bangladeshi government announced an across the board relief package of $8.6 billion, which includes significant support to small and medium enterprises.
“It is therefore high time that the government of Pakistan should consider out of box solutions to stimulate the economy so as to minimise the impact of a global recession and prevent massive unemployment in Pakistan,” Shahab said.
KCCI further sought revocation of a legal obligation on traders to furnish identity of buyers having an invoice above Rs50,000 with the apex tax authority.
The condition of CNIC was to implement from August last year. However, the implementation was deferred till January 31, 2020.