KARACHI: The Businessmen Group (BMG) and the Karachi Chamber of Commerce and Industry (KCCI) have asked the government not to implement the Finance (Supplementary) Bill 2021 without taking the stakeholders on board.

In a joint statement issued on Friday, they said an increase in tax rates and withdrawal of exemptions on inputs of essential consumer items, such as packaged dairy milk, oilseeds for sowing, plant machinery and industrial raw material (including raw cotton), would have a detrimental impact on the economy and the poor.

BMG Chairman Zubair Motiwala and KCCI President Muhammad Idrees lamented that a consistent rise in petrol, electricity and gas rates gave the impression that the International Monetary Fund (IMF) had devised a programme to make Pakistan completely unviable.

They noted that the sales tax rate under the Eighth Schedule on branded and packaged milk and dairy products had been increased from 10 per cent to 17pc, which should be revised down to the previous value as it would put an additional burden on consumers.

Seek broadening of tax base instead of increasing rates

They also criticised the imposition of a 17pc tax on flavoured milk, which they said was a health drink for children.

The imposition of sales tax on raw material used for manufacturing pharmaceuticals would also have a negative impact and the way refunds are made by the Federal Board of Revenue (FBR), the prices of drugs would surely increase as the impact would be passed on to retailers, they said.

Besides, imposing a 17pc sales tax on household sewing machines, mostly used by self-employed women who work from home to earn a living, was extremely unjust, they said. They also feared that a 17pc sales tax on oilseeds for sowing would prove counterproductive and discourage local production of edible oil.

Instead of putting an additional tax burden on the industry and consumers to comply with IMF conditions, the government and the FBR should step up efforts to broaden the tax base, they said.

They believed that the government could generate significant additional revenue by plugging various loopholes, including exemptions given on the import of various items for the erstwhile federally and provincially administered tribal areas, which were being massively abused. These items include steel sheets, bulk edible oil, plastic materials, etc. Moreover, large-scale smuggling of black tea, edible oil, auto parts and many other high-value products was also causing heavy losses to the national exchequer, they said.

“The IMF can only provide broad guidelines to curtail fiscal deficit and cannot micro-manage the economy. It is unjust and unfair to continue targeting those sectors which are tax compliant and unable to bear more taxes,” the statement said.

They also feared that an increase in sales tax on raw cotton would be counterproductive and asked the government to restore the concessional tax rate of 5pc on importing raw cotton to support the industry.

BMG and KCCI leaders said that for the first time in the history of Pakistan, 17pc sales tax had been imposed on export processing zones which were undoubtedly a conspiracy to destroy the activities in these zones. Clause 8 of serial number 102 of the Amendment Bill must immediately be withdrawn and the original status of the export processing zones must continue, they demanded.

Published in Dawn, January 15th, 2022