The PTI government has proposed an array of significant tax concessions for the businesses in the budget for the fiscal year 2021-22 as it switches gears to growth. It has also promised the exporters to continue the provision of energy to them at the existing concessionary, regionally competitive rates beyond June 2021. The business lobbies have mostly reacted positively to the measures suggested in the budget to decrease their cost of doing business and enhance their profits.

The Pakistan Business Council (PBC), a lobby group representing the large corporate sector, says the new budget will boost investment in the industry to further push exports.

“The budget addresses all major concerns facing the country: food security, employment in a Covid-impacted economy, external account balance and funds for socio-economic development,” PBC CEO Ehsan Malik said in his comments on the budget proposals.

“It addresses the issue of the disproportionate tax burden on the industry, talks about broadening the narrow tax base and seeks to boost growth, which, in turn, will generate more revenue for development spending,” he added.

‘The industry is disappointed that most of the recently withdrawn tax exemptions at the behest of the International Monetary Fund are not reversed’

He said no budget is perfect, and no single budget can cure all the ills of the past. “This budget is no exception. The industry is disappointed that most of the recently withdrawn tax exemptions at the behest of the International Monetary Fund are not reversed in the budget. The surest way to infuse investor confidence is to provide consistent policies.

“Overall, this is a positive budget. The litmus test of its success will be the speed with which jobs and disposable incomes rise and how quickly the cost of the essentials decline.”

The Overseas Investors Chamber of Commerce (OICCI), which represents foreign investors operating in Pakistan, termed the budget proposals growth-oriented. OICCI Secretary-General Abdul Aleem says the government has focused on the ease of doing business and facilitating manufacturing in Pakistan in the budget owing to limited fiscal space and the continuing Covid-19 challenges.

“The rationalisation of custom tariff on a large number of imported raw material will have a positive impact on the manufacturing industry.” He was glad to note that the government has also announced some bold measures towards broadening the tax base including incentivising the retail sector with tax credit for using Electronic Point of Sale machines.

“A few key matters are not addressed, or only partially addressed, including the continuation of the minimum tax regime as organisations with large turnovers but low-profit margins would continue to be subjected to turnover tax, which raises their tax liability to twice the normal tax rate. While no new incentives have been announced for new investment in plant and machinery or specific incentives for foreign investors the overall sentiment is towards ease of doing business making budgetary measures, by and large, business-friendly,” he concluded.

Textile exporters have termed the budget as growth-led and export-oriented with progressive initiatives to accelerate economic growth in the wake of the pandemic. “The new fiscal plan has set in place pro-growth measures to maximize industrialisation, create jobs, increase revenue and attain higher export growth,” Pakistan Textile Exporters Association chairman Muhammad Ahmed said, teeming the budget a step in the right direction. “Now the challenge for the government is to execute it in letter and spirit.”

However, according to him, the budget does not give a roadmap for disbursement of exporters’ old refunds pending since before July-2019. “Besides no funds are allocated for the revival of sick units which could help in fetch extra $1 billion in foreign exchange and create additional thousands of new jobs.”

The budget is believed to be very beneficial for the equity market. “From the equity market perspective, the budget is a positive one, where various incentives have been offered to businesses/capital markets,” Fahd Rauf, head of research at Ismail Iqbal Securities, said.

Execution is the real challenge

Ahmed Kamal

Ex-Chairman Pakistan Textile Exporters Association

The 2021-22 budget is excellent for the entire manufacturing industry, including textiles. The incentives and relief given to businesses and exporters will go a long way in boosting economic growth, generate jobs and alleviate poverty. The commitment of the government as reiterated by the finance minister in his budget speech to continue to provide the export industries energy at regionally competitive prices will further boost investment and exports from the country. The textile industry does not want any other incentive but competitive energy rates. Now the challenge for the government is to execute the budget. That is an area where successive governments have faltered in the past. It is high time that the government pays us our longstanding income tax and duty drawback on local taxes and levies refund claims the way it has done in the case of sales tax refund claims.

Construction sector friendly

Mohammad Hassan Bakshi

Former Chairman ABAD & Member Prime Minister Task Force on Housing

The budget for the year 2021-22 is balanced keeping overall available resources. No new taxes have been proposed by the government and certain reduction are proposed in existing taxes. The 10pc increase in the salary of government servants and increase in the minimum salary to Rs20,000 is a step in the right direction. The development expenditure of Rs900bn will give the right stimulus to the economy. Incentive in duties/taxes along with financing facility for cars below 850cc have been provided to help the common man to graduate from motorcycle to a small car. The continuity of policy for housing and construction will help the industry plan its future projects accordingly. The grant of a subsidy of Rs30bn for low-cost housing and subsidised loans will also help the common man. Extension of time for exemption from section 111 for people investing in the construction sector and removal of regulatory duty on import of M/S steel bars as demanded by the Association of Builders and Developers would have been icing on the cake, however, this demand was not accepted.

Published in Dawn, The Business and Finance Weekly, June 14th, 2021