Budget termed good news for capital markets

Published June 12, 2021
The collection target of the FBR for 2021-22 is Rs5.82 trillion, which is over 17 per cent higher than a year ago. — AFP/File
The collection target of the FBR for 2021-22 is Rs5.82 trillion, which is over 17 per cent higher than a year ago. — AFP/File

KARACHI: President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Nasser Hyatt Magoo said on Friday the national budget was mostly in line with the recommendations put forward by the country’s apex trade body.

Speaking to Dawn, Mr Magoo said the government had proposed reducing regulatory, customs and additional customs duty on a fair number of products, which would help set the wheels of economy in motion.

“Our only concern is the high collection target of the Federal Board of Revenue (FBR). How will the FBR achieve it given that the government has either lowered or completely done away with a number taxes?”

He expressed the fear the government could rely on mini-budgets to raise additional taxes during the fiscal year.

The collection target of the FBR for 2021-22 is Rs5.82 trillion, which is over 17 per cent higher than a year ago. Non-tax revenue is also set to increase 22pc to Rs2tr.

FPCCI chief says reduction in taxes on products will set wheels of economy in motion

The FPCCI president praised the government for introducing third-party audit in tax assessment-related issues. The move would help curb the harassment of businessmen at the hands of the FBR staff, he said.

He commended the finance minister for raising the ceiling for annual turnover tax on SMEs from Rs10 million to Rs100m and reducing the minimum tax rate from 1.5 per cent to 1.25pc. However, he said the SME sector should have received more support in the form of incentives and tax exemptions.

Mr Magoo said the budget documents did not show whether the government was serious about bringing down food inflation. As an example, he said various taxes still applied to essential kitchen items like sugar and edible oil.

Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI) M. Abdul Aleem termed the budget growth-oriented. The rationalisation of customs duties on a large number of imported raw materials would have a positive impact on major sectors like textile, pharma, chemical, steel and food, he said.

“However, certain additional taxes on the use of telecom facilities will negatively impact the telecom companies and need to be reviewed,” he added.

Mr Aleem regretted that the continuation of the minimum tax regime meant the organisations with large turnovers but low profit margins would be subjected to a turnover tax at a (lower-than-before) rate of 1.25pc. This raises their tax liability to twice the normal tax rate, he noted.

According to Ammar H. Khan, a Karachi-based independent economist, the growth target of 4.8pc for 2021-22 is “entirely achievable”. A lot of industrial expansion backed by the central bank’s Temporary Economic Refinance Facility (TERF) will come online in the next fiscal year, thus increasing economic output, he said.

“It’s a spending-oriented budget as opposed to the last couple of budgets that focused on cost-cutting and austerity,” Mr Khan said.

Most analysts termed the budget positive for the capital markets. Stocks in oil refining, steel, pharmaceutical, food, footwear, chemical and textile sectors are likely to benefit from the budget proposals.

“The budget appears highly positive with the reduction in capital gains tax (from 15pc to 12pc),” according to a note issued by AKD Securities. It also praised the removal of withholding tax (WHT) on margin financing by the National Clearing Company of Pakistan as well as the elimination of WHT collected by the Pakistan Stock Exchange from its members.

Published in Dawn, June 12th, 2021

Opinion

Sialkot speaks
31 Jul 2021

Sialkot speaks

The PML-N leadership is shell-shocked. A drubbing by the PTI in Sialkot? In the heart of Sharif territory?
Who messed up Afghanistan?
Updated 31 Jul 2021

Who messed up Afghanistan?

Russia and USA are squarely responsible for Afghanistan’s tragedy but Pakistan is certainly not innocent.

Editorial

China-Taliban meeting
Updated 31 Jul 2021

China-Taliban meeting

WITH the government in Kabul appearing to stand on very fragile foundations, and as the clock ticks down to the ...
31 Jul 2021

Outages in Makran

IT is no surprise that people in Balochistan’s Makran Division have of late taken to the streets to protest in the...
31 Jul 2021

Reduction in polio cases

AFTER the long and tedious efforts of those running the national polio programme, there are signs that Pakistan ...
30 Jul 2021

Judge’s elevation

A CONTROVERSY roiling the legal fraternity for a few weeks has come to a head. It was precipitated by the Judicial...
PTI’s Sialkot win
30 Jul 2021

PTI’s Sialkot win

The PML-N’s internal duality is a particularly acute factor that is dragging down the party in electoral contests.
30 Jul 2021

Attack on Chinese

AN attack targeting two Chinese nationals in Karachi on Wednesday should put the security apparatus on alert in ...