LAHORE, June 19: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Thursday said heavy taxation would increase the cost of production and hit exports by rendering local products uncompetitive on world markets.

FPCCI President Tanvir Ahmad Sheikh, while commenting on the federal budget proposals for 2008-09, said that it had created unrest among the industrial sector especially the manufacturers who were already hard-hit by high costs of gas, petrol and electricity as well as the falling rupee against the dollar.

He suggested that the federal government could easily generate Rs100 billion additional in revenues if it takes stringent corrective measures to check smuggling and under-invoicing of goods imported from China. “This will also help to reduce the number of taxes on the local industry,” he added.

Saarc Chamber of Commerce and Industry Vice-President Iftikhar Ali Malik said that the imposition of 10 per cent withholding tax on electricity bills would further squeeze the liquidity of the industry, which is already facing severe energy crisis.

He suggested that the condition of 35 per cent LC cash margin should not be made compulsory and be left on banks and importers relations to ease liquidity crunch for the importers of industrial raw material.

Mr Iftikhar, the former FPCCI president, said that keeping in view the business scenario world over, the high rate of mark-up by banks be reduced to single digit to provide solace to hard-hit industry.

Lahore Chamber of Commerce and Industry President Muhammad Ali Mian said that the one per cent increase in sales tax would further burden the trade and industry sector. “High markup rate, 35 per cent LC margin and energy crisis are driving the cost of doing business upward”.

He was of the view that the imposition of withholding tax on cash withdrawal would be counterproductive.—APP