Aggressive taxes, high mark-up arrest SME growth

LAHORE: Pakistan’s small and medium enterprises have stopped growing on account of an aggressive taxation regime, harassment by tax departments, high mark-up rate and massive energy costs.

This was the crux of a pre-budget seminar on Monday, where Small and Medium Enterprises Development Authority (SMEDA) CEO Farhan Aziz Khawaja was in chair.

Opening the consultative seminar, Khawaja urged the participants to identify the crucial issues faced by the SME sector in the prevailing economic crisis. “We should focus our attention on finding solutions of the problems,” he suggested, while asking to consider the examples of Egypt and Sri Lanka that had adopted viable measures to come out of the crisis that was similar to what Pakistan was facing at present.

He assured that the recommendations given by the participants of this session would be taken up within the policy corridors of Islamabad. He said that a meeting of the business community leaders in this context would also be arranged with the federal minister of industries and production.

The business community representatives expressed a common viewpoint that heavy mark-up rate, augmenting prices of energy and unbearable burden of multiple taxes at provincial and federal level had squeezed the margins of growth for the industry.

Appreciating SMEDA for raising the voice of SMEs in the policy making corridors, they said that the government should avoid making major decisions on taxation and regulations without taking the business community into confidence.

Muhammad Haroon, a representative of the Peshawar Chamber regretted that tax concessions committed with the business community of FATA to promote SMEs had not been implemented. He suggested to utilise 2,080 kilometers Afghan border linked with FATA for promoting bilateral trade between SMEs of the two countries.

Quetta Chamber of Commerce and Industry Vice President Amjad Siddiqui asked to prepare a strategy to explore the mineral resources available in Balochistan. He said that 42 registered minerals, including gold, coal and manganese could change the economic fate of Pakistan if utilised with the support of modern technology. He also urged to promote agriculture and livestock sector in Balochistan through modern techniques.

PIDE Senior Economist Mehmood Khalid in his concluding remarks made a number of forecasts about the incoming fiscal budget. He suspected that the future budget would bring a big cut in Public Sector Development Programme account and a huge increase in tax burden. He suggested that instead of increasing the tax rate, the government should take measures to expand the tax base.