KARACHI: The Pakistan Business Council (PBC) has said that the federal budget 2024-25, approved on Friday, remained almost as regressive as the bill proposed earlier.
“Sacred cows will graze freely while the golden geese will be cooked. More alarmingly, none of the country’s fundamental needs will be facilitated,” remarked PBC Chief Executive Ehsan Malik.
Exports and investment will not be encouraged. Existing multinational companies will reconsider their viability, putting off new foreign direct investment (FDI). He added that many budgetary measures will have an inflationary impact and delay the reduction in the policy rate.
Meanwhile, ex-Fata/Pata will enjoy sales tax concessions for another year while the rest of the country’s iron, steel, and other taxed sectors suffer from a diversion into their market. He lamented that loose and often adulterated milk will gain share over safe and now sales-taxed packed milk in a country suffering nutritional challenges.
The formal sector, especially the telecom operators, will be obliged to perform unpaid tax collector functions under threat of steep penalties if they err. At the same time, their sales and profits will suffer from reduced consumer affordability due to higher advance tax on prepaid bundles. Brain drain will pick up pace as experienced professionals seek jobs abroad or outside the formal sector to escape higher taxes, Mr Ehsan warned.
The government’s choice of a piecemeal approach, levying higher export taxes instead of a comprehensive review of the country’s export competitiveness compared to other countries, is a strategic misstep. Pakistan lags behind Bangladesh, India, Vietnam, Indonesia, and Egypt on energy costs, concessionary credit and export rebates, he said.
At a time when the country needs FDI, the budget will struggle to retain the ones that are here. Multinational companies that pay royalties approved by the State Bank of Pakistan could have a quarter of their advertising and sales promotion expenses disallowed for tax. This could seriously harm their bottom line, reducing the attractiveness of further foreign investment, he said.
Published in Dawn, June 30th, 2024
