SITE Association urges government to lift import restrictions in budget 2023-2024

SITE Association urges government to lift import restrictions in budget 2023-2024

Karachi, May 23, 2023 – The SITE Association of Industry (SAI) has called on the government to lift import restrictions in the upcoming budget for 2023-2024.

The association has emphasized the need to save industries from closure, prevent further unemployment, and strengthen the role of the industrial sector in import substitution and export promotion.

In its budget proposals, SAI recommended that the government eliminate unannounced and imprudent restrictions on imported raw materials, machinery, and spares. These restrictions have significantly reduced output in the industrial sector, exacerbating the ongoing economic crisis and jeopardizing the government’s tax revenue targets.

READ MORE: KCCI stresses out-of-box solutions to prevent further downslide in economy

The prevailing inflation, rising cost of doing business, and high lending rates, reaching as high as 22-23%, have severely impacted the economy. Immediate measures are required to rescue the industrial sector from its current state of decline, as failure to do so may have irreversible consequences for the future.

SAI also raised concerns about the State Bank of Pakistan’s (SBP) EPD Circular No 20 of 2022, stating that it has created more problems than it has solved. Some provisions of the circular contradict the SBP Foreign Exchange Regulation/Manual, requiring clarification, elaboration, and amendments to establish a comprehensive framework for what the SBP refers to as “self-funded imports.”

READ MORE: Severe gas shortage forces textile industry to halt production: APTMA

The association further highlighted the persisting issue of a low tax-to-GDP ratio and a narrow tax base, as well as counterproductive taxation policies that incentivize non-taxpayers rather than honest taxpayers. To promote a documented economy and a thriving formal sector, SAI recommended the implementation of a unified tax number for both income and sales tax. It stressed that no sizable business should operate without obtaining a tax registration certificate, placing responsibility and accountability on the Federal Board of Revenue (FBR).

SAI proposed consolidating the numerous withholding and presumptive tax provisions, replacing them with a comprehensive “tax on income” regime. Additionally, it demanded a 50% reduction in turnover tax rates, allowing businesses to pay income tax based on their assessable income and adjust sales tax according to their actual turnover and value addition.

READ MORE: Pakistan textile exports slump by 14% amid global recession

Other proposals included reducing the general sales tax (GST) rate from 18% to 15% and abolishing the 3% further sales tax on unregistered persons. SAI emphasized the importance of mandatory sales tax registration for every sizable business by the FBR. It also called for expedited tax refunds within 60 days of the refund application, and if not met, the restoration of sales tax zero-rating for the entire supply chain of zero-rated goods.

READ MORE: Political conflict threatens Pakistan’s economy: PYMA

Addressing rampant under-invoicing and misdeclaration, which negatively impact local industries and deprive the exchequer of essential revenue, SAI recommended consolidating varying rates of statutory custom duty, additional custom duty, and regulatory duty into a single custom duty with a maximum slab of 25%. This would be accompanied by a cascading tariff structure that starts with a 0% rate on raw materials and gradually increases with stages of production and value addition until reaching the finished product level. Such measures would make smuggling and clandestine imports economically unfeasible.

SAI President Riaz Uddin expressed hope that these budget proposals, addressed to the Minister of Finance, Governor of the State Bank, and Chairman of the FBR, will be approved in the best interest of the country.