KARACHI, May 7: Businessmen hope that the government will provide incentives to them as well as small and medium enterprises in the budget 2005-2006 so that they could face the challenges of globalization. On the other hand, exporters also hope that the government will now realise that the exporters cannot survive under the severe competition in international markets mainly due to high cost of doing business. Exporters urge the government to frame new taxation policy aimed at cutting cost of production to make local products competitive in the global markets.
This is the main crux of the Site Association of Industry’s pre-budget proposals, submitted to the government. The business community firmly believes that expansion of tax base, reasonable reduction in the tax rates, creation of conducive investment environment, curtailment of undesirable discretionary powers from various tax laws, simplification of rules and regulations, removal of irritants and impediments in seeking justice are some of the important steps which the CBR must take into account.
The association expects that the import duties will be considerably reduced in new budget to check the increasing smuggling of Polyester Fabrics including other goods, whereas the issue of sales tax refund and duty draw back will be gradually finished through a system of zero rated duty which is very essential to create such an environment in which industrialists can do business freely especially in post-quota regime.
The government must allow imports of plant, machinery and spare parts, not manufactured locally on zero-rated customs duty, which will definitely help in promoting industrial activity in the country, Site Association said.
With regard to the import of second-hand boilers, the association said more than five-year older boilers are not available in Europe or American markets, as the minimum life of boiler is up to 50 years. Therefore, boilers older than 10 years should be allowed.
The Association says that tax on banking sector should be brought at par with other listed companies and Investors Protection Fund and Members Contribution Fund of stock exchanges be exempted from tax, while mutual fund industry be given further tax incentives to deepen the investors base.
On income tax, the Association seeks exemption of minimum turnover under section 113 of the Income Tax Ordinance 2001, in case of company incurring severe losses.
The exemption of house rent of 45 per cent basic salary from total income should be same for all salaried person without any maximum threshold of house rent allowance of Rs270,000 calculated on salary of Rs600,000. This will provide some relief to the higher taxpayers from the salaried class, as at present this facility is restricted to maximum salary of Rs600,000 per annum.
Further, the maximum tax rate for salaried person be reduced to 25 per cent from 35pc so they will be in a position to manage their standard of living properly.
The association thinks that the GST rate of 15 per cent is abnormally high and proves counter-productive as it is instrumental in tax evasion and promotes smuggling. The rate of GST must be brought down to 10 per cent and imposed across the board with better administration.
The import of spare parts of new as well as old textile machinery is essential to keep the industrial wheel moving. The present rate of customs duty on spare parts ranges from 5 to 25 per cent, which is very high and it should not exceed five per cent. The association also seeks duty free import of laboratory equipment imported by textile units.
On smuggling, the association said Pakistani industrialists are facing the worst kind of smuggling of foreign goods into the country. The government has been totally ineffective in dealing with smuggling, under-invoicing, and mis-declaration. The inflow of fabrics from China, Far East, and India has sounded the death-knell for the domestic producers. These goods are cleared with the active connivance of custom authorities and the border guards. Every Dry Port of Pakistan has assumed a position of a state-within-a-state. The government must withdraw the clearance of imported goods through these Dry Ports, as these are nothing but sanctuaries for smugglers.
How can a domestic fabric producer file a case of anti-dumping against an importer of fabrics when the goods are cleared clandestinely or in an illegal manner? The CBR must institute a committee that includes representatives of fabric producers, and each consignment must be examined and the contents analyzed.
All intellectual property laws applicable for the time being in Pakistan may also be extended to operate in the Federally Administered Tribal Areas and Provincially Administered Tribal Areas.
The vehicles carrying fake goods manufactured within or outside regulated areas, owned by whosoever should be confiscated outright. Necessary legislation to this effect be made or amendments be brought about in the relevant laws.