Business community for fixed taxation regime

RECORDER REPORT

LAHORE: The Chambers of Commerce and Industry of the country at a convention on “Revitalization of Economy” have expressed reservations on taxation system and called for fixed taxation regime and revival of self-assessment scheme.

LCCI President Almas Hyder presided over the meeting and gave a brainstorming presentation on economic issues, their causes and solution. President and office bearers of Faisalabad, Islamabad, Sahiwal, Kohat, Gujrat, Sialkot, Khanewal, Gujranwala, Haripur and Vehari Chambers of Commerce and industry expressed their views while Mian Muhammad Ashraf, Iftikhar Ali Malik and Mian Anjum Nisar also spoke on the occasion.

The participants said the federal budget does not talk about jobs, growth and the vision of a large economy. This scenario has created an environment of uncertainty for businesses and deterred them from working freely. Without urgent policy action, economic and financial stability could be at risk, and growth prospects will be insufficient. In this context, it is imperative to discuss reasons of uncertainty in our economy and recommend viable policy actions to government for removing this element of uncertainty and letting businesses work freely.

They said that rupee devaluation, policy rate, inflation, taxation System, elimination of SRO 1125 & refunds to exporters, state owned enterprises, investment and regulatory environment and gap between revenue & expenditure are the most important areas to focus on.

The participants of the convention said that government has to come up with a clear plan about the outlook of economy, especially the exchange rate to remove uncertainty among the businesses. They said that the plan should also include projections for next four years about size of economy, per capita income, exports, investments, inflation and policy rate.

An announcement of exchange rate Band in advance for current Fiscal Year (2019- 20) would help in curtailing dollar hoarding and stabilizing the exchange rate market. They said that government should take steps (through State Bank Interventions) to reduce the interest rate to a single digit. They said that instead of tackling inflation through depressing aggregate demand (by increasing interest rates), best way to reduce inflationary pressures is domestic supply expansion, industrialization and export growth.

They said that all raw materials must attract zero or low custom duties. Government must eliminate regulatory duties and additional custom duty on raw materials, so that local industry is able to compete with smuggling and mitigate the effect of low tariff FTAs. They said that custom duties on intermediary products should be reduced so that our industry is able to import quality materials, components and machinery from the rest of the world at the same duty rate at which it imports through different FTAs.

They said that measures should be taken to make sure that tax collection from all sectors is commensurate to their contribution in GDP. The agriculture sector which is around 19 percent of GDP contributes just 0.6 percent to tax collection while services sector which is around 70 percent of GDP contributes only 30 percent to tax collection.

They said that the Sales Tax Rate of 17 percent is exorbitantly high and must be reduced. “Overall, there is a need for overhauling of taxation system with competitive tariff regime that promotes Industrialization, tax holidays for new entrepreneurs, reduction in frequency & number of taxes and equality in taxation system where all incomes are treated and taxed equally”, they added.

The participants further stated that the decision of the elimination of SRO 1125 should be put in abeyance till an efficient system of Refunds is made, tested and implemented. The government must lay down a clear plan about State Owned Enterprises (SOEs) as they are eating up over Rs.400 billion annually and this huge amount is being paid by the taxpayers.

They said that there is a need to review old regulations with a regulatory guillotine and replace them with smart/prudent regulations for facilitating Investors in overcoming persistent business regulatory environment challenges e.g. registering a company, getting industrial electricity connection, getting construction permits, resolving insolvency and registering of property.