KARACHI, June 6: The trade and industry have termed the budget 2005-06 business-friendly and investment-oriented, which ensures supply side of the economy where the country had been lagging behind and was unable to make a major breakthrough in exports.
The most encouraging measures suggested in the budget proposals are bringing most of the country’s exports under zero rate sales tax. Major industry involved in exports such as textiles, surgical and sports goods, leather and carpets have been removed from sales tax regime.
Instead, the government has proposed to impose 3 per cent tax — one per cent income tax and two per cent sales tax — on local sales by these industries, which will in a way help generate some revenue.
Business leaders also welcomed government move to remove duty on industrial raw materials, which, they said, would help the exports to compete in the world market under WTO regime.
However, there were some apprehensions among trade and industry regarding the revenue gap the proposed relieves would create.
“We would come to know about facts when the government would release the details in a day or two because the revenue target has been increased from Rs590 billion to Rs690 billion,” a business leader asserted.
Fawad Ijaz Khan, the chairman, Pakistan Readymade Garments Exporters Association (PLGMEA) said that undoubtedly it was a welcome measure that the government had proposed to put all exports under zero rate regime of Sales Tax but what would be the fate of duties and taxes-paid stocks held by the industry.
He said that normally industry imports raw material and other inputs for a period of six months, which meant a very large quantity of duties-paid stocks was lying with exporters. Mr Fawad sought some way out for such exporters and urged review of deadline of June 30, 2005 in this regard.
However, he was critical of increasing withholding tax rate on leather garments and leather goods, which in a way, would increase the cost of production.
Another leading exporter Aziz Memon said that zero rate of sales tax regime would benefit exporters a lot and help remove corruption and extra cost the government and exporters had to pay. Since this would eliminate refund system of sales tax it would help exporters to save money paid towards ‘speed money’ and similarly the government would not pay more refunds, he added.
The chairman, Pakistan Bedwear Exporters Association (PBEA) Shabir Ahmed said the government had met long-standing demand of exporter for zero rate regime. He said that measures proposed in the budget 2005-06 would help increase production and the country would be able to export more.
Javed Chanio, the chairman Pakistan Cloth Merchants Association said reduction of import duty on raw materials would help reduce cost of doing business and enable exporters to compete in the world market.
Former President, Karachi Chamber of Commerce and Industry (KCCI), said that by enhancing the size of PSDP by 34 per cent it would not only help provide jobs but also work as a booster to the economy which was already on the rise.
However, he said, the government still had to provide more funds for over all education sector, though sizeable increase had been proposed in the budget 2005-06. He said for the last five years India had been spending more funds on education which helped the country to create more middle class of different slabs.
The chairman, Pakistan Commodity Traders Association, Raees Ashraf Tarmohammad said that it was highly appreciative that the government did not resort to taxation even after increasing the size of the revenue budget from Rs590 billion to Rs690 billion.
He further said that exemption from penalty on disputed customs cases is a welcome measure as exporters would be in a position to clear their goods before June 30, 2005 to get the benefit without paying extra amount other than the principle.
However, he said it would have been better had the government not imposed 0.1 per cent withholding tax on cheques of over Rs25,000. He suggested that either the amount should have been higher to meet the desired results or it should have not been imposed at all.
Former vice president FPCCI, Maqsood Ismail said that it was the first budget which had taken care of the supply side of economy, which would help boost exports.
He said the removal of duties on industrial raw materials would make exports competitive in the world market especially in the wake of tough competition after the World Trade Organization’s quota free regime from this year.
Younus Rizwani Sheikh, former president Income Tax Bar Association, Karachi said that reduction in income tax for individuals from 35 per cent to 30 per cent would help increase the buying power of consumers especially of the middle class which had been witnessing tremendous pressure of high cost of living.
Similarly, he said the reduction in corporate taxes would boost investment and in turn help generate more employment. He appreciated the proposal of reducing withholding tax from 3 to 1 per cent on shipb-reaking industry as it would help revive this industry which had been lately under crisis.
Mr Rizwani said that the proposed 0.1 per cent withholding tax on cheques above Rs25,000 would help document the economy and also generate some revenue. Reduction of tax rate on Small and Medium Enterprises (SMEs) converting to companies would also encourage documentations as most of the SMEs stay out of the ambit of documentations.
He said relief on TFCs and NSS schemes as well as IPOs with different slabs of investments would also help capital formation in the country and it should be used into productive and real sectors of the economy instead of going into such sectors where speculative activity was carried out.
