FPCCI denounces super tax

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has denounced imposition of 10 percent super tax on large industries, which already pay hefty corporate tax of 29 percent and generate millions of jobs in the country as well.

FPCCI Acting President Shabbir Mansha on Friday said, “No country in the world can charge 39 percent tax to corporations and still keep the economy afloat. Additionally, new private-sector and foreign investments dry up completely in an uncompetitive market.” He explained that 13 industries would be affected, including cement, steel, sugar, oil and gas, fertilisers, LNG terminals, textiles, banking, automobiles, cigarettes, beverages, chemicals and airlines. Furthermore, all the remaining industries would be subjected to 4 percent additional tax.

Mansha called the imposition of tax abrupt as it was not mentioned in federal budget 2022-23, announced just two weeks back.

He emphasised that the cost of doing business was already at an all-time-high in the country and the interest rate of 13.75 percent would not let the economy grow at any meaningful rate. Prices of electricity and gas have already made us uncompetitive as far as the exports are concerned.

He expressed concerns regarding talks of another interest rate hike, and urged the government to consult stakeholders about bringing the rate down so businesses could plan ahead accordingly.

Mansha emphasized that imposition of PDL – though in a phased manner – would totally destroy the cost of doing business competitiveness and would fuel inflation like never before through its multiplier effect. He demanded the government should take the business community on board on its commitment with IMF on PDL.

The acting FPCCI chief also stressed upon the need to start a consultative process with the stakeholders on the implementation status of hike in electricity base tariff, impending PDL imposition and new or additional taxes as these costs would cumulatively destroy business sentiment and halt industry. Prime Minister Shahbaz Sharif on Friday said that the government has decided to impose a 10 percent super tax on large-scale manufacturers, including those working in the oil, fertiliser, steel, sugar, automobile and textile sectors. The premier made the announcement after chairing a meeting of his economic team, during which important decisions were taken related to budget 2022-23.

It should be noted here that UNDP’s Pakistan National Human Development Report 2020 states that Pakistan’s tax system does not contribute significantly to reducing inequality in the country. The primary reason for this was the low share of direct taxation, which was under 20 percent.

The report states that while the burden of taxes rises gradually with income, making the country’s tax system only mildly progressive. “In essence, this is because special interest groups have successfully manipulated the system to seek and obtain a host of tax breaks and exemptions. Thus, taxes have played a very limited role in reducing inequality or making income distribution less skewed in favour of the rich.” Ghias Khan, the CEO of Engro Corp, in a tweet said: “Imposing a super tax on industries is regressive and will hamper industrialisation, curb manufacturing and not reduce the current account deficit. Pakistan needs a wider tax base thru documentation, taxing unproductive sectors like real estate and long-term policy development.