Big businesses see the federal budget as pro-business, is it pro-people too?
he federal budget presented on June 10 was not a tough one as was feared even though the situation demanded collection of more taxes and strict action against tax evaders.
Although fingers are routinely pointed at those who pay no taxes at all, tax evasion even by the documented taxpayers is also very high. Many businesses import goods citing lower prices to steal 40-80 percent of the due duty. Many manufacturers under-report their production and save huge amounts of sales tax and income tax. The governments look the other way, meanwhile, to retain the “investors’ confidence”.
After almost every budget, some businessmen hail the efforts of the government in the media but grumble in private, especially if the taxes have been raised. They usually have no issue with higher import duties on luxury items. They continue to use luxury cars and luxury goods even at higher prices because a majority of them generate more money by passing on the impact of taxes imposed on them to the end consumers.
The federal government has raised the corporate tax rate and slapped a 10 percent higher tax on banks but we hear no complaints, though the banks have raised this issue in private meetings. The corporate sector is not happy with the additional tax imposed on them. Their contention is that they are already paying high taxes. They ignore the point that their incomes are increasing substantially every year.
The businesses have praised the government’s decisions regarding payment of Rs 40.5 billion refund claims and sales tax returns to traders and industrialists. This is a huge amount and the release of these funds will improve their liquidity. The abolition of customs duty on agricultural machinery has also been appreciated by trade and industry.
It is unlikely that the entire benefit of duty withdrawal will be passed on to the farmers. The sales tax exemption for solar panels has also been welcomed by all.
The introduction of the Alternate Dispute Resolution system will allow the businesses to settle their disputes with the Federal Board of Revenue. The committee will consist of a member each from the FBR and the party in litigation. The two will choose a third member. The majority decision will be binding. Businessmen have welcomed the mechanism for resolution of tax disputes.
Soon after the presentation of the budget most traders and trade associations welcomed the introduction of a Rs 3,000 to Rs 10,000 fixed tax regime for small retailers. They said this will not help expand the tax base and increase the revenue.
A marble industry representative said a fixed tax was also levied on the marble industry and related to their electricity bills. It was withdrawn by the previous government. He demanded the re-introduction of a fixed tax system for the marble industry. He said that the government had made a good decision in allowing the adjustment of taxes at the import stage. He said the government should now take measures to reduce petroleum products consumption.
The KCCI has described the Federal Budget 2022-23 as pro-public and business-friendly. Chairman of Businessmen Group in the KCCI, Zubair Motiwala, and KCCI president, Muhammad Idrees Memon, have lauded the government’s announcement to pay all pending claims of duty drawback on local taxes and levies.
Businessmen have appreciated the government’s effort not to burden them despite the need for imposing new taxes. However, this is not true. The increase in petroleum products’ prices directly affects the common man.
The increase in transportation charges will result in an increase of all goods and services. At the same time, electric power rates are set to increase by almost Rs 9 per unit. Gas prices will also be raised by 4 percent from July 1. The utilities may consume more resources in some households than the expenditure on food.
Economist Dr Aliya Hashmi says the budget is balanced. She says the IMF is opposed to blanket subsidies but the government has provided targetted subsidies to the poor.
Pak-Afghan Joint Chamber of Commerce and Industry vice president Zia-ul-Haq Sarhadi has said the federal budget is relief-oriented and strikes a balance. He has appreciated the withdrawal of taxes on installation of solar panels and says he hopes that this will help people cope with the power outages.
The Karachi Chamber of Commerce and Industry has described the federal budget as pro-public and business-friendly. Chairman of Businessmen Group in KCCI, Zubair Motiwala, and KCCI president, Muhammad Idrees Memon, in their statements have lauded the government’s announcement to pay all pending claims of duty drawback on local taxes and levies.
The Rawalpindi Chamber of Commerce and Industry has termed the fiscal budget balanced and praiseworthy in a challenging economic environment. The RCCI president, Nadeem Rauf, speaking after the budget speech, said the fixed tax scheme for small traders will help expand the tax net.
Pakistan Businesses Forum (PBF) vice president Ahmad Jawad has criticised the federal government for doing “too little, too late” in terms of creating fiscal space for the agriculture sector. He said, however, that the reduction of duty on industrial raw material will help reduce the cost of doing business. The revenue target, he said, was achievable. He also welcomed the self assessment scheme and expressed hope that it will reduce blackmailing.
United Business Group spokesman Mirza Ikhtiar Baig has said the federal budget is good in the present circumstances. He noted that efforts have been made to support some of the neglected sectors, including the IT and the SME.
SAARC Chamber of Commerce and Industry president Iftikhar Ali Malik has said the budget is pro-poor as well as soft on businesses. Seed Manufacturers and Importers Association leader Shahzad Malik has welcomed the withdrawal of 17 percent sales tax on seeds. Pakistan Poultry Association former chairman Abdul Basit has demanded a similar withdrawal for poultry feed ingredients and vaccines used by the poultry sector.
The writer is a senior reporter at The News International