While giving proposals for the federal budget 2023-24 Pakistan’s largest private sector business groups including multinationals ‘Pakistan Business Council’ (PBC) urged the government to ensure level playing field for domestic manufacturing, promoting industrialization, consolidation of businesses for scale to improve competitiveness, reducing cost of doing business and helping Pakistan meet its commitments to the UN Sustainable Development Goals.
The PBC pointed that Across the board massive under invoicing and dumping of imported products has been increasing, adding information regarding values at which various custom check posts clear import consignments is not publicly available.
It recommended that values at which import shipments are cleared through PRAL or CARE need to be publicly available. The government must insist on Electronic Data Interchange (EDI), for both FTA and non-FTA imports from China & other major trading partners. It added that in future the requirement of EDI should be made compulsory for imports from FTA / PTA & major trading partner countries. S. 25(A) and 25(D) of the Custom Act 1969 (“Act”) to be amended to allow local manufacturers to participate in fixing the ITP. Mere representation from commercial importers as is the case currently, poses risk of biased decisions, which will hurt overall tax / duties collection as well as the local manufacturing industry.
When discussing promoting Industrialization, growth, job creation, the PBC said Clause 126E, entity setup in Special Economic Zones as income of SEZ entity (Zone Enterprise or operator) is exempt from income tax for a period of 10 years, there should not be any withholding of Income tax at source at any stage for Zone Enterprises and under any provisions of ITO till such time exemption is available to the Zone Enterprise.
It recommended that in order to address the issue rate of income withholding under all provisions of the Income Tax Ordinance 2001 be reduced down to o 0% in line with the zero rating as allowed for certain items under clause 5AC of Part II to the 2nd Schedule to the Income Tax Ordinance, 2001.
About promoting competitiveness through consolidation of businesses for scale the PBC said in order to distinguish multiple taxation of ICD with an income tax exemption, it is proposed that a new subsection be inserted in section 59B saying distribution of dividends within companies eligible for group relief under this section shall not be deemed a taxable event. “Clause 1A of section 59B should be deleted”, the PBC recommended.
For reducing the cost of doing business in Pakistan, the PBC recommended that timelines should be specified for the applicability of super tax. Mere levy of super tax without any specific timeline is simply an increase in the corporate tax rate from the current 29%. With the recent unprecedented depreciation of the Pak Rupee, import constraints, and an increase in interest costs, it has become difficult for businesses to absorb an additional levy of super tax for an indefinite period. Without prejudice to the above, Super Tax should be applied on progressive tax basis instead of application of a certain percentage (%) on the entire income.
In order to Pakistan’s commitment to the UN Sustainable Development Goals, the PBC said government needs to support the private sector to ensure that Pakistan meets its commitment to the UN Sustainable Development Goals.
