FBR proposed to review regulatory duty regime to promote domestic industry

KARACHI: Business community has urged the Federal Board of Revenue (FBR) to review existing regulatory duty regime in order to promote domestic industry.

Pakistan Business Council (PBC) in its budget proposals 2020/2021 advised the FBR to review of the regulatory duty where domestic industry can expand and market its capacity to the export markets.

The PBC supports the government’s resolve to simplify, reduce and introduce cascading tariffs to promote industry.

However, at a time of global recession when many overseas producers will be looking to find markets, we urge the government to factor this into its tariff review to protect jobs in Pakistan.

Unless there is very strong anomaly, we recommend that present tariffs be maintained in order to preserve scale and competitiveness of domestic industry.

Moreover, the DTRE scheme should be simplified for SMEs to avail.

The PBC strongly advocates that the Finance Bill 2020 has a bias in favor of the manufacturing sector as a recovery in the manufacturing sector will have a multiplier effect of the economy.

The PBC continues to advocate that taxation needs to be based on the principle of “all income irrespective of source should be taxed & all taxpayers must file tax returns”.

The PBC and its members also firmly believe that the fiscal space that the government is looking for to implement its ambitious socio-economic agenda will not, and cannot be provided by continuing to increase taxation on the already taxed sectors of the economy.

The taxation base needs to be widened through better documentation by bringing the under taxed, and the currently exempt sectors in the tax net.

The current tax policies are leading to a reduction in investable surpluses for the corporate sector. The short-term revenue enhancement measures pursued by FBR in the recent past have acted as a disincentive to not only re-investments by existing units but have also acted as a deterrent to fresh investments in industry and the formal sector.

Last year, the PBC welcomed the government’s policy announcement to separate tax policy and tax administration, it is however disappointed with the pace of implementation of this decision and urges the government to move on this front to create taxpayer confidence in the tax machinery.

The laws on Group Taxation & Group Relief and the Alternate Corporate Tax (ACT) need to be addressed to create an investor friendly environment in the country.

The arbitrary & non-transparent implementation of tax laws by FBR functionaries in their zeal to achieve unrealistic revenue targets is severely impacting the viability of the formal sector.

The continued failure of the FBR to use data-mining to identify those who are either not paying or underpaying their dues is also an area of concern for the formal sector.

There is blatant misuse of the Afghan Transit Trade continues, wholesale and retail markets all over Pakistan are flooded with smuggled products, however despite having the jurisdiction to act against the open sale of smuggled products, the FBR continues to hide behind such flimsy excuses like “lack of support from local administration.”

The revenue leakages in the Customs department need to be plugged, Electronic Data Interchange (EDI) with China needs to be fully implemented.

The Afghan Transit Trade needs to be better monitored, one measure could be the collection of all dues which are payable by importers in Pakistan and refunding the same once the shipment has conclusively entered Afghanistan.

The PBC appreciates that the government managing the economy under an IMF program and at the same time managing the expectations of a nation reeling under the impact of the COVID-19 pandemic does not have the fiscal space to provide major incentives, however, it also believes that it is the government itself which through its policies can create the space that it requires to implement its social agenda.

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