Businessmen hail budget, but warn of long-term effects

KARACHI: Businessmen on Friday said the budget for the next fiscal year seemed balanced on the face of it, but its long-term impacts on trade and industry would become clear after a close analysis of the complete finance bll document.

Federal Finance Minister Shaukat Tarin presented the Federal Budget 2021-22 in the National Assembly on Friday amid a cacophony of catcalls, boos, and jeers from the Opposition benches.

The industry officials are wondering how the government, having announced so many exemptions and cuts in the taxes, will generate 24 percent more revenue compared to FY21. They also pointed out a lack of measures to bring down the spiking food prices. FPCCI’s Businessmen Panel Chairman Mian Anjum Nisar, while addressing a press conference, said initial impression of the budget speech was it was very positive for the industry.

Nisar, who was flanked by FPCCI President Nasir Hayat Maggun and Pakistan Industrial and Traders Association Front (PIAF) Chairman Mian Nauman Kabir, said there was no mention of rationalisation of power tariff, which was the real concern of the industry. He said presently the real issue of the country was uncontrolled inflation but no subsidy for food items prices or sales taxes or import duties on edibles and pulses had been announced.

He appreciated the announcement of drop in Capital Gains Tax from 15 percent to 12.5 percent, reduction of Custom Duty, Additional Custom Duty and Regulatory Duty on import of raw materials for the textile sector, hot rolled coil steel sector, pharma sector (more than 350 APIs), footwear sector, cables, and other 328 tariff lines.

PIAF Chairman Mian Nauman Kabir, appreciated the new Uniform Export Facilitation Scheme, exemption of Federal Excise Duty from food and related consumable goods, cars of up to 850cc, and juices, and reduction of sales tax for cars up to 850cc.

Kabir said removal of withholding taxes on cash withdrawal and banking instruments, package for housing, SME support programme, fixed tax scheme, and Rs100 billion package for uplift of underdeveloped areas were good measures for the country.

He said zero-rating of IT exports (offering tax credits, exemption of sales tax) was the right decision, while measures to control circular debt to be implemented in the next two years, which included control on line losses, increasing renewable energy, restructure of private power debt etc was also a good step. The PIAF chairman also lauded reduction in turnover tax from 1.5 percent to 1.25 percent and introduction of interest-free loans for up to Rs500,000 to the industry. Value-added Textile Sector official Muhammad Jawed Bilwani told The News the government had announced to continue facilities announced for the textile sector.

The government had also dropped five percent custom duty on yarn import till June 30th, which would continue while DLTL would also. “We had demanded an increase in it, which the government did not approve, but the facility will continue,” Bilwani said adding, “The situation will become clear after all budget documents are analysed and they us give incentives in writing”. Former President Karachi Chamber of Commerce and Industry (KCCI) Zubair Motiwala in a press conference at KCCI said it was a balanced budget and the government’s resolve to increase the tax net was a step in the right direction, as only 2.2 million people paid taxes out of a population of 220 million. Of which, 1.2 million were salaried people, thus, only 1.0 million people paid taxes in this country, which was alarming, he said.

Motiwala questioned the government’s ability to meet its revenue target, which was 24 percent higher or Rs1,230 billion higher than FY2020-21.

He lamented the government announcement that it would criminalise tax avoidance. “Putting the business community in jails will not help the government achieve vertical growth,” he said.

Motiwala suggested state-owned loss-making companies including PIA and Pakistan Steel Mills should be privatised. “You have not privatised any lossmaking institute in three years,” he said.

Shariq Vohra, president KCCI, said the government had incorporated several proposals of the chamber with minor changes. Withholding tax had been reduced on 40 items, which was a praiseworthy initiative. However, they could further comment on it after looking at the all budget documents, he said. Auto expert Mashood Ali Khan said the budget would be beneficial for the small car manufactures as taxes had been cut for cars below 850, and only Suzuki would get the benefits.

Khan said a cut in sales tax on electric vehicle (EV) would not provide much relief, as Pakistan would not be able to manufacture EV in a year. “There is need to build the basic infrastructure before manufacturing electricity-powered cars,” he said.