KARACHI, Aug 23: President Small and Medium Enterprises Alliance (Samea) Zafar Iqbal said on Tuesday, that cumbersome and out-dated tax laws are inhibiting small and medium enterprises (SMEs) growth.

“Despite the fact that 96 per cent of the industries in the world fall under SMEs definition and contributed around 38 per cent towards the GDP of the developed countries but in our country even today there is no proper and comprehensive definition for the SMEs,” he maintained.

The definition given by the State Bank of Pakistan (SPB) for the SMEs, he said is related to finance and capital only, whereas other important areas such as strength of labour, tax rate, etc., are still to be defined.

Zafar Iqbal said that it was unfortunate that in US an enterprise having 1 to 90 workforce is taken as small and with 100 to 500 falls under the definition of medium and above 500 workforce is considered to be large enterprise. In the US, he added, there is no non-productive worker such as peon, clerical staff, or helper or assistance.

However, in Pakistan where a sizeable number of non-productive staff still exists in a business and industrial enterprise, policy makers want to put an enterprise with workforce 1 to 49 under small unit.

He cautioned that if the SMEs were not encouraged, there would be no industrialization in the country and it was imperative that liberal and transparent laws should be framed so that SMEs could flourish and grow to play their rightful role in the economy.

The President Samea further said that free and fair environments given by Dubai, Malaysia, Singapore and other countries of the region ensured their economic growth and Pakistan had to do the same if economic turnaround has to be seen.

He drew the attention of the chief guest, Federal Tax Ombudsman Mr Justice (Retd) Munir A Sheikh towards section 32 of Federal Tax Ombudsman Ordinance. Mr Zafar Iqbal said cases referred to the President under this section normally do not get the attention of the President and on the contrary the decision on these cases is taken by lower staff of relevant department.

Therefore, he said there was no reason why cases should be referred to the President who dose not have time and are mostly referred to lower staff of relevant departments to take decision. When FTO, he said, is a higher authority, so his decision should be taken as final ruling.

Zafar Iqbal cited an example where a case was put before the President but it was referred to concerned department which in this case was Capital Development Authority (CDA). The CDA manipulated the finding and somehow managed to revert the FTO’s decision. There is ambiguity in the section which should be amended, he added.

Mian Zahid Hussain, vice president Samea, stressed upon the need to simplify laws and make working easier for SMEs, by ensuring free and fair environments. Most of the SMEs, he said lack education and they do not have resources and right technology to compete, therefore, they could not sustain under multiple and complex tax laws.