ost of the suggestions made by trade bodies, associations and chambers in the form of budget proposals this year were ignored by the government. The government has also turned a deaf ear to the protests by business bodies after new tax measures were announced in the budget.

The same government has, however, accepted to the demands of the petroleum dealers who called for a nationwide strike after new taxes were imposed by the government through the Finance Act 2024. The government has also requested the flour mills to call off their strike for ten days so that their concerns can be discussed and resolved.

Ijaz Khokar, a leading exporter from Sialkot, says that all the recommendations by the export sector were ignored by the government. Instead, he said, government had ended the fixed tax regime for the exporters and brought them into the regular tax regime. “This will open new avenues of corruption now that the exporters will be at the mercy of the tax authorities,” he says.

In 1991, the Nawaz Sharif government had introduced the fixed tax regime for the exporters. The change had then resulted an increase in tax collection. Khokar said the two measures by the then Nawaz Sharif government — the introduction of the fixed tax regime for exporters and the abolition of the zila tax had boosted the investors’ trust.

“The export sector has been asking for zero-rated sales tax regime. They want a no-tax- no-refund regime to end corruption in securing refunds from the FBR. Else, they want a fast and transparent sales tax refund system. But none of these demands has been met,” he says.

The state of economy is so dependent on politics currently that many international buyers are not confident of all their contracts being completed. Some of them have included backup plans in the contracts (in case the orders are not delivered in time).

The ease of doing business and the [low] cost of doing business are the key to sustained activity in an economy. Take the example of volatile energy prices. For a whole year, many Pakistani suppliers were unable to quote a standard price of their products as they had to work it out for every individual order. On the other hand, most international buyers asked for a yearly price so that they could plan their businesses accordingly.

International buyers are closely watching the current political unrest in the country. They do not trust the suppliers’ ability for timely completion of their orders in case the political scene changes radically.

Many international shipping companies have stopped serving Pakistan due to the low volume of exports. Earlier, their vessels used to visit Pakistan on a weekly basis. Now they come bi-monthly or depending on the demand. 

For greater ease of doing business, the exporters have been asking the government to create a one-window for them and collect all the taxes there so that they do not have to deal with multiple departments.

The situation is alarming. Some international shipping companies have stopped visiting due to the low volume of exports. Earlier, their vessels used to visit Pakistan on a weekly basis. Now they come bi-monthly or depending on the demand generated by their representatives in Karachi.

25 percent of the textile mills are said to be on the verge of closure. No investors, local or foreign, are ready to make new investment. If the government cannot deal with these challenges, how will Pakistan achieve the $100 billion exports target by 2030?

Kashif Anwar, the Lahore Chamber of Commerce and Industry president, says that the chamber supports the government’s idea of expanding the tax base. However, he adds that the tax base cannot be expanded until the existing taxpayers are facilitated. Rather than facilitating the existing taxpayers, the government has put a heavier burden on them and is asking for more documentation. This will further discourage the un-documented sector.

The focus these days is on digitization. However, the documentation of the economy is far from complete. He says telling retailers to get registered is going to be a hard ask if the procedures and documents are cumbersome.

This year’s budget has barred the registered taxpayers from cash transactions. In December 2023, a retailer reporting the purchase of Rs 20 million in his income tax returns was required to get registered for the sales tax as well. Measures introduced in the new budget have also enhanced the powers of the tax collectors.

The business community had expecting their income to increase and their costs reduced. However, the government has raised the utilities rates, especially the power tariff. There is a need to revise the gas and electricity tariffs, mark-up rates and the rupee-dollar parity. Inflation cannot be controlled without controlling the cost-push factors.

In Pakistan, taxes are typically imposed only on those who are already in the tax net. The businesses will not grow well unless the government announces a long-term policy, at least a five-year scheme. “In Pakistan, many policy decisions are made on an ad hoc basis, for three to six months. These decisions are subject to change with the change of faces in high offices. The tax base will not expand until the trust deficit is remedied, ,” Anwar adds.

The writer is a staff reporter at The News. He tweets @jawwadrizvi