KARACHI: Minister of State for Finance & Revenue Ali Pervez Malik and Chairman Federal Board of Revenue (FBR) Malik Amjed Zubair Tiwana along with FBR Team, after having an interactive discussion on Karachi Chamber’s Proposals for Federal Budget 2024-25, assured that all those proposals, which are aimed at a conducive business environment and support growth, will be positively taken into consideration for implementation in the forthcoming budget.

While speaking at an online meeting via Zoom, the Minister assured to forward KCCI’s recommendations to higher authorities so that those proposals could be included in the budget which can be accommodated despite the present tight fiscal tight space. 

The meeting was also attended by President KCCI Iftikhar Ahmed Sheikh, Senior Vice President Altaf A. Ghaffar, Vice President Tanveer Ahmed Barry and Chairman Special Committee for Budget Proposals Muhammad Ibrahim Kasumbi. In addition to Chairman FBR, the FBR team comprised Member (Customs-Policy) Suraiya Ahmed Butt, Member (Inland Revenue-Policy) Amna Faiz Bhatti and Member (Inland Revenue-Operations) Mir Badshah Khan Wazir who also attended the meeting with KCCI.

President KCCI Iftikhar Ahmed Sheikh, while discussing KCCI’s Proposals for FY2024-25, stated that keeping in view a series of discussions and meetings from time to time, the business community was fairly optimistic that the budget 2024-25 would present those measures proposed by Chambers of Commerce and other institutions which were mainly focused on stimulating economic growth through industrialization and support to SME sector.

He stressed the need to effectively deal with serious issues being faced by the business and industrial community since long including high taxation rates, exorbitantly high and totally unbearable energy tariffs along with excessively high customs duties and sales tax etc. on imported raw material and other essential products required for industrial production.

Chairman KCCI’s Special Committee for Budget Proposals Muhammad Ibrahim Kasumbi, while delivering a presentation on Budget Proposals submitted to Ministry of Finance, Ministry of Commerce, FBR and National Tariff Commission, particularly expressed deep concerns over disparity in rates of tax incidence on raw material which was resulting in revenue leakages. “The most effective approach to curbing malpractices and revenue leakage is through the elimination of disparities in sales tax and withholding tax rates, coupled with the rationalization of further taxes which are also causing drain on exchequer.”

To address the misuse of tax exemptions and restore fairness in the import sector, Ibrahim Kasumbi recommended to discontinue the tax exemptions granted to Azad Kashmir, FATA & PATA regions by the end of the current fiscal year, with no further extensions beyond June 2024. “This action will help in providing a level playing field and allow importers to compete more effectively in local markets, besides helping the government in mitigating revenue losses”, he said, adding that black tea imported under concessions and exemptions  to FATA, PATA and AJK was widely being sold in Karachi, Lahore and other areas of Pakistan which was causing  losses not only to importers but also to the already ailing economy as the total consumption of black tea in Pakistan stood at 340,000 tons, of which 140,000 tons was being imported after payment of duties and taxes while the rest of 200,000 tons was either being smuggled or imported under the tax exemptions to AJK, FATA and PATA.

He further stated that disparities in sales tax and withholding tax rates on raw materials like Polymers (Plastic raw materials), polyester yarn, iron & steel and edible oil etc. were resulting in misuse of concessional rates of taxes specially in sales tax and high rate of further tax at 4 percent and it is misused by various elements which is resulting in loss to the government as well as to the commercial importers who are supporting the SME sector and are a dependable source of revenue.

Referring to the issue of Further Tax, he suggested to reduce the rate of Further Tax to 1.0 percent for sales to unregistered entities which will discourage evasion and drastically curtail the fake and flying invoices resulting in full recovery of sales tax revenue to the FBR.

He also advised that the minimum turnover tax rate should be withdrawn to ease companies’ tax burden and ensure operational sustainability. “FBR must develop the capability to assess profits and not rely on presumptive taxes such as minimum tax on turnover.”

Terming Super Tax as ‘additional burden’, Chairman Special Committee for Budget Proposals requested to implement Super Tax selectively, targeting certain high profit-oriented sectors rather than imposing it across all companies surpassing a certain income threshold. This approach entails levying the tax on sectors with exceptional earnings/ higher margins, such as banking, insurance, financial services and energy, which often enjoy huge profits without facing adequate taxation. “Exempting manufacturing from the Super Tax is vital as manufacturing sector often reinvest profits into expansion and employment, boosting local output and exports, he added.

Ibrahim Kasumbi raised the issue of Section 7E of ITO which had a severe impact on entire real estate and construction sector.  Due to the taxes imposed on assumed income and other provisions, the transactions in real estate have come to a standstill. The construction sector which supports almost 50 other industries is facing stagnation and sharp decline in investment.  A substantial amount of almost Rs.90 billion is stuck in real estate which can otherwise be diverted to industry and trade. It was therefore proposed by KCCI to withdraw certain provisions such as deemed income and tax on transactions of undeveloped plots of land to release the funds stuck in real estate and ease the liquidity situation in trade and industry which are tightly squeezed due to high interest rates of 24-25%.

Senior Vice President KCCI Altaf Ghaffar stressed that the budget should focus more on economic reforms and provide a clear road map for growth rather than measures for revenue generation. He thanked the State Minister and FBR team for having productive discussions with KCCI team and hoped that KCCI’s Proposals presented in the national interested will be accommodated in forthcoming budget.