Budget 2024-25: Traders and industry call it a ‘more IMF-friendly budget’

Published June 13, 2024
MEMBERS of the Karachi Chamber of Commerce and Industry watch the budget speech of Finance Minister Muhammad Aurangzeb, on Wednesday.—Shakil Adil/White Star
MEMBERS of the Karachi Chamber of Commerce and Industry watch the budget speech of Finance Minister Muhammad Aurangzeb, on Wednesday.—Shakil Adil/White Star

KARACHI/ISLAMABAD/LAHORE: Businessmen and industrialists initially on Wednesday appeared unsatisfied with the budgetary measures proposed for 2024-25, which appear anti-industry and more IMF-friendly.

Trade and industry leaders have termed the budget a burden on the existing taxpayers, and no serious efforts have been made to broaden the tax base or promote industrial production and commerce in the country.

Addressing a press conference at the Chamber House, Islam­abad Chamber of Commerce and Industry President Ahsan Zafar Bakhtawari said that instead of broadening the tax net, the government has fixed an ambitious tax target of Rs12.97 trillion, which would increase the burden on existing taxpayers.

The government is set to miss the tax collection target of the current fiscal year.

Taxation measures to increase cost of doing business, fuel inflation

He warned that imposing excise duty on cement and allocating huge amounts for debt servicing could prove detrimental to the country.

He also said that the government needs to pay more attention to the country’s important and vibrant tourism sector, which can generate substantial foreign exchange.

Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General Abdul Aleem told Dawn that the revenue target of Rs12.9tr and GDP growth of 3.6pc are ambitious but indicative of the government’s positive direction.

However, he said the budget is silent on measures to bring agriculture income and realtors into the tax net and incentivise manufacturing and employment.

Mr Aleem said the salary increase for government employees looks excessive and will have an overall multiplier effect on pension costs.

Pakistan Business Council Chief Executive Officer Ehsan Malik said “expecting a single year’s budget to cure all the deep-rooted economic ills is unrealistic. This year, another challenge is to win PPP’s support and meet IMF’s conditions.”

Nevertheless, the budget was expected to contain inflation, revive investment, and level the playing field with the informal sector, thus generating higher taxable profits and tax revenue. Also, as exports are the only sustainable way to balance the external account, exports and exporters were expected to be encouraged. “The budget proposals failed to live up to these expectations though there are some positive measures,” he remarked.

With a super tax of up to 10pc and double taxation of inter-corporate dividends, the effective tax rate for shareholders in a holding company can amount to over 50pc, Mr Malik said, adding that the withdrawal of the holding period for the levy of Capital Gains Tax will be detrimental to the capital market, which was just seeing the revival of foreign portfolio investment.

Karachi Chamber of Comm­erce and Industry President Iftikhar Ahmed Sheikh and Chairman Businessmen Group (BMG) Zubair Motiwalla said the budget looks anti-industry and IMF-friendly in view of 48.7pc increase in revenue target and other measures, thus further squeezing the existing taxpayers.

They said it is a tough budget that will deeply impact various segments of society.

They added that new taxes will fuel the cost of production besides pushing up inflation.

Sugar-coated budget

Meanwhile, the Rawalpindi Chamber of Commerce and Industry (RCCI) has termed the budget a ‘sugar-coated’ effort and remarked that an attempt has been made to make it superficially acceptable.

RCCI President Saqib Rafiq has said, “Increasing the tax slab to 45pc is unacceptable, and we strongly reject it.”

He lauded the increase in tax and duty on luxury and expensive vehicles and appreciated the steps taken in the fiscal budget for digitalisation of the economy.

The business community of Lahore, considered a stronghold of the ruling PML-N, appreciated the pro-business measures in the federal budget.

However, the Lahore Chamber of Commerce and Industry expressed concerns about some taxation steps, which it said were bound to raise the cost of doing business and decelerate economic activity.

LCCI President Kashif Anwar reacted mixed to the finance minister’s speech. While the budget has some positive aspects, it also faces some significant challenges.

He remarked that this budget is apparently difficult and little beneficial for the economy. He emphasised the need to consult the stakeholders before finalising the budgetary measures, stating that this budget would not provide the necessary impetus for the manufacturing and export sectors of the economy.

He pointed out that imposing federal excise duty on cement and property and import duty on glass would hinder business operations.

Calling for the elimination of non-documented sectors alongside increasing digitisation of the economy, he questioned how the construction sector would develop in the face of capital gain tax on real estate.

The LCCI president warned that raising the advance tax from 1pc to 2.25pc on the supply chain would increase the cost for manufacturers and retailers and that hiking tax rates in this manner would lead to further tax evasion.

He said that increasing the sales tax rate from 12pc to 18pc for tier-1 retailers in these challenging times would hinder efforts for documentation of the economy.

FPCCI vice-president and regional chairman Zaki Aijaz Qureshi said the finance minister did not explain certain points, including export promotion, import reduction steps, privatisation policy, and ending cross-subsidy, in his speech. Likewise, no clarification was given about the IPPs, the main culprit behind the high power tariff.

Published in Dawn, June 13th, 2024

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