Karachi, July 19, 2024 – The Karachi Chamber of Commerce and Industry (KCCI) has issued a stern demand for the government to reassess its taxation policies and energy tariffs, citing severe repercussions on various sectors of the economy.
The call comes amid escalating financial distress faced by small traders, industrialists, and other economic participants due to what KCCI President Iftikhar Ahmed Sheikh describes as “unjust tax measures” and exorbitant energy costs.
In a statement released on Friday, Sheikh highlighted the growing hardships experienced by a wide range of stakeholders, including small businesses, exporters, and daily wage earners, due to the severe impact of recent fiscal and energy policies. The KCCI President warned that the current economic environment, characterized by high taxation and steep energy prices, is pushing many businesses towards insolvency and mass layoffs.
“The alarming situation calls for extensive relief measures on a war-footing basis to ensure that the wheels of industry continue to spin,” Sheikh said. He expressed concern that without immediate intervention, Pakistan’s economic landscape could descend into chaos, with potential social unrest due to widespread job losses and financial instability.
Sheikh’s remarks follow numerous complaints from members of the KCCI about the unprecedented cost of doing business. The President noted an unprecedented level of discontent among Karachi’s business community, with many businesses contemplating shutdowns or production cuts due to the unmanageable costs driven by high energy tariffs and stringent tax regulations.
One contentious issue is the imposition of a 2.5 percent advance income tax on unregistered retailers under the Finance Act of 2024. Sheikh criticized this move as an attempt to coerce the fast-moving consumer goods (FMCG) sector into becoming withholding agents, a development he believes will negatively impact the sector’s operational dynamics. He reported that a significant portion of FMCG goods is being returned to manufacturers, which exacerbates the financial strain on the industry.
Energy costs have also been a major point of contention. Sheikh highlighted that electricity tariffs remain at a prohibitive 18 cents per kWh, with fixed charges increased to Rs1,250. Gas tariffs, meanwhile, have surged to Rs3,000 per MMBtu. These elevated costs, Sheikh argued, are unsustainable for small traders and industrialists, who are struggling to remain viable amidst such financial pressures.
Additionally, Sheikh pointed to the recent assurance by K-Electric’s Chief Executive Moonis Alvi to visit KCCI and address concerns about load shedding in underprivileged areas of Karachi. The KCCI President called for the establishment of a helpdesk at KCCI to facilitate small traders and urged KE to reduce excessive load shedding, especially during the ongoing heatwave that has exacerbated public suffering.
The KCCI’s appeal also addressed the broader economic impact of the current fiscal policies, including the shift from a 1 percent turnover-based Final Tax Regime (FTR) to a 29 percent taxation on taxable profits. Sheikh warned that this transition could lead to a drastic reduction in exports, placing additional strain on the country’s foreign exchange reserves.
Further complicating matters, Sheikh criticized the controversial SRO350, which has created confusion and compliance challenges among taxpayers. He urged the Federal Board of Revenue (FBR) to rectify issues with SRO350 to avoid further disruptions in the export of essential commodities like meat, seafood, and vegetables.
Sheikh also expressed frustration over the slow reduction of interest rates, which remain higher than in competing countries. He suggested that the government should work with KCCI to implement feasible relief measures within the constraints of the IMF program.
In conclusion, Sheikh emphasized the need for a comprehensive review of current economic policies to prevent further economic deterioration. He urged the government to balance IMF requirements with domestic economic needs to avoid sacrificing the country’s export potential and overall economic stability.
The KCCI’s call for action underscores the urgency of addressing these economic challenges to ensure a stable and sustainable business environment in Karachi and beyond.