KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has opposed a proposal from the Federal Board of Revenue’s (FBR) to tax retirement funds and to impose federal excise duty (FED) on consumer goods in the forthcoming budget.

In a communication to FBR’s Member Inland Revenue (Policy) Rehmatullah Wazir on Friday, the OICCI warned that including such measures in the new budget would hurt the middle and lower middle class, including salaried persons who are already under tremendous pressure owing to high cost of living.

Taxing retirement funds, including gratuity, provident and pension schemes, and restoring FED on consumers’ goods would directly burden the people belonging to lower-income groups, it said.

Above all, these measures in no way would help in broadening the tax base, it maintained.

The OICCI pointed out that country’s tax base was very limited with only around one million registered taxpayers. The proposal to tax retirement savings of the registered taxpayers was grossly unfair because the victims of this change in law would be those who are already contributing to the national exchequer.

The FBR’s member was reminded that similar funds in other countries were not taxed, whereas in Pakistan provident fund was already being heavily taxed since 2008 through an amendment in the Finance Act 2008 (rule 3 of sixth schedule in the Income Tax Ordinance 2001).

The additional tax on provident fund would only destroy one of the largest pooled funds in the country which has been in existence for decades, the OICCI said.

The OICCI also opposed re-introducing of FED on a number of consumers’ goods including cosmetics, paints and varnishes, and lubricating oils, and enhancement in excise duty on beverages and cigarettes. These measures would result in cost-push inflation on items which are purchased by every household, it added.

The FBR was also reminded that FED was eliminated on cosmetics, especially shampoos, in the fiscal years 2011-12 and 2012-13 and the industry passed on the benefit to end-consumers.

Published in Dawn, May 28th, 2016