June 8, 2003	Sunday	Rabi-us-Sani 7, 1424

KARACHI, June 7: The advance ruling for foreign investment with regard to tax liability along with other tax and duty concessions as announced by the federal finance minister Shaukat Aziz in his budget speech on Saturday are aimed at enhancing and boosting economic activity by encouraging local and foreign investment which would ultimately generate higher production and create more employment opportunities.

Despite the fact that without getting full details of the budget document for the year 2003-2004, it was too early to grasp and know the real impact of the measures adopted. Nevertheless on the available facts as unfolded by the finance minister in his speech it seems that the major thrust of the economic planners is towards promoting investment and enhancing production activity for generating more employment in the country.

These observations were made by tax experts and consultants as well as business leaders who eagerly await for other details and seems to be still somewhat skeptical about the entire economic document tailored for fiscal year starting from July 1, 2003.

The advance ruling for foreign investment with regard to tax liability will have a far reaching positive impact on direct foreign investment (FDI) which had been shy and hesitant to take any risk before knowing their final tax liability, observed former president, Income Tax Bar Association, Karachi (ITBAK) Abdul Qadir Memon.

He said there was a lot of resentment and fear among new as well as old foreign investors over their tax liability, which was never clear and remained one of the irritants for FDI. However, after knowing their tax liability in advance, foreign investors would early calculate their working with those of other investment opportunities available in other countries of the world.

Another tax consultant Younus Rizwani Sheikh told Dawn that removal of irritants from the sales tax would encourage higher revenue collection and would also encourage fresh registration under ST regime. By streamlining the sales tax system the economic planners seem to have targeted higher revenue collection from sales tax.

Removal of multiple audit from sales tax and assuring of only one audit in a fiscal, he said, would help build confidence of taxpayers who have long standing demand for restricting the scope of audit in sales tax. Furthermore issuance of certificate after holding of audit would also assist in eliminating corruption and bring to an end the harassment of a taxpayer by auditors.

The amnesty given in sales tax by the finance minister in his speech will go a long way in broadening the tax net under ST regime. On paying 2 per cent sales tax over the turnover of last two years (2001-2002), will encourage taxpayer to register themselves under ST regime. Increasing the limit from Rs5 to Rs20 million for turnover tax at 2 per cent will enable more taxpayers to come under tax net, he added.

He said that reduction in penalty for non-filing of monthly sales tax return from Rs5000 to Rs100 would help build confidence among taxpayers.

Former president All Pakistan Tax Bar Association, Z H Jafri said that the main thrust of tax reforms as was evident from the budget speech was towards voluntary compliance which means that a taxpayer would himself act as an income tax officer (ITO).

Under this system, he said, a taxpayer would have to furnish details of his income, wealth tax, as well as expenditure to cross-check the balance between income and expenditure.

Maqsood Ismail, former vice president of FPCCI, said that the wealth tax, which was suspended about a couple of years back was still haunting taxpayers but on abolishing it the finance minister had not only removed the fear of taxpayers but has also managed to create confidence in government policies.

He said increasing of income tax limit on rent from Rs100,000 to Rs200,000 and reduction in its advance tax (withholding tax) from 10 per cent to 5 per cent is also encouraging measure. Maqsood Ismail said reduction in customs duty on import of raw materials meant for engineering industry will help develop the industry.

The chairman, Pakistan Commodity Importers Association (PCIA), Raees Ashraf Tarmohammed said reduction of customs duties on items, which are prone to smuggling would not only enhance government revenue but also encourage organized sector to grow.

He said reducing of duty on tea, silk yarn, spices and dry fruits from 20 to 25 per cent to 20 to 10 per cent would help check the menace of smuggling, which was causing silent damage to the country’s economy.

Raees Ashraf Tarmohammad hailed finance minister’s decision to reduce duty on another 200 items from 15 to 25 per cent to 10 and 5 per cent. Furthermore, reduction in withholding tax on imports and supplies from 6 per cent to 5 per cent would help reduce input cost of industry.

The chairman, Pakistan Bedwear Exporters Association (PBEA) Latif L Jamal said by allowing input adjustment on local purchase under the DTRE rules the finance minister has made system workable and now there was no reason as to why exporters would not get themselves registered under these rules.

Former chairman PBEA hailing the budget suggested that the government should have slashed customs duty on import of cars above 1800cc. He said reduction as announced by the finance minister from 200 per cent to 150 per cent is insufficient and it should have been much lower as it would have also helped bring down the prices of locally assembled cars.

Dr Mirza Ikhtiar Baig a leading industrialists of the city said that by declaring Gwadar port as special economic zone with no duty, no GST and silverlined with income tax incentives will help business community to do more business with our regional markets particularly Central Asian States, and Gulf countries.