RECORDER REPORT
KARACHI: Overseas Investors Chamber of Commerce and Industries (OICCI) Secretary General M Abdul Aleem has termed the 2021-22 budget proposals overall positive and growth oriented.
He said that in view of the limited fiscal space available to the government and the continuing Covid-19 related challenges, the authorities had focused on ease of doing business and in facilitating manufacturing in Pakistan.
The rationalisation of customs tariff on a large number of imported raw materials will have a positive impact on the manufacturing in major sectors like textile, pharma, chemicals, steel, foods etc. Reduction in general rate of minimum tax from 1.5 percent to 1.25 percent, with the commitment to reduce it gradually in the coming years, and from 0.75 percent to 0.5 percent for refineries and rationalisation of 12 withholding taxes appears to be steps in the right direction.
This together with measures to take away unnecessary provisions in the tax regime, like section 122(5A), which were abused by some officials together with selective tax audit by third party are seen as steps towards ease of doing business. Further, removing final tax regime on certain class of income, allowing 100 percent in-put sales tax adjustment for listed companies, which was limited to 90 percent of output tax, and reducing capital gain on disposal of securities are positive measures for the economy.
New measures were also announced to facilitate telecom and IT exports. Introduction of Special Technology Zones is also a positive initiative towards boosting digital landscape in the country, and similarly recognising telecom as industrial establishment will bring them at par with other sectors of the economy. However, certain additional taxes on usage of telecom facilities will negatively impact the telecom companies and need to be reviewed by the authorities.
The government has also announced some bold measures towards broadening the tax base including incentivizing the retail sector with tax credit for using Electronic Point of Sale machines.
A few key matters not addressed, or only partially addressed, include continuation of the minimum tax regime as organisations with large turnovers but low profit margins would continue to be subjected to turnover tax, albeit at a lower rate of 1.25 percent which raises their tax liability to twice the normal tax rate. Another key issue overlooked is the recommendation by most businesses to incentivise investment in manufacturing, by restoring sections 65B, 65D & 65E, which were deleted through a tax amendment ordinance earlier in the year, he said.
While no new incentives had been announced for new investment in plant and machinery or specific incentives for foreign investors the overall sentiment was towards ease of doing business making budgetary measures, by and large, business friendly, he added.
