Fed­eral bud­get 2016-17 evokes mixed re­sponse from US in­vestors

Pakistan Observer - - EONOMIC WATCH -

SALIM AHMED LAHORE—The Amer­i­can Busi­ness Coun­cil of Pak­istan (ABC) viewed Fed­eral Bud­get 2016-17 as a con­tin­u­a­tion of the sta­tus quo with re­spect to over­all pol­icy re­form. While ABC mem­bers wel­comed the gov­ern­ment’s de­ci­sion to ex­tend tax in­cen­tives, un­der Sec­tion 65d, on new plants till June 2019 and the con­tin­ued re­duc­tion of cor­po­rate tax rate by 1 per cent, in line with plans to bring rates down to 30 per cent by FY18, they ex­pressed con­cern over the lack of ini­tia­tives be­ing un­der­taken to broaden the tax net and to sim­plify tax ad­min­is­tra­tion for ex­ist­ing tax­pay­ers.

“These moves will help pro­mote For­eign Di­rect In­vest­ment within the coun­try. Our mem­ber com­pa­nies will fac­tor in these tax in­cen­tives when mak­ing crit­i­cal in­vest­ment de­ci­sions. With cor­po­rate taxes in Pak­istan cur­rently at 31 per cent, they re­main high when com­pared to the rest of the world. How­ever bold re­forms are re­quired to widen the tax base and sim­plify the tax­a­tion struc­ture,” said Nadeem Elahi, Pres­i­dent Amer­i­can Busi­ness Coun­cil of Pak­istan. The in­vestor group was of the view that while cer­tain as­pects of the bud­get could be con­sid­ered in­vestor friendly, other mea­sures would have a neg­a­tive im­pact on the over­all busi­ness en­vi­ron­ment by in­creas­ing the cost of do­ing busi­ness and bur­den­ing ex­ist­ing tax­pay­ers with in­di­rect taxes. “The ex­ten­sion of su­per tax has negated the pos­i­tive im­pact of re­duc­ing the cor­po­rate tax rate,” com­mented Elahi.

“Fur­ther­more the pro­posal to ex­clude Sales Tax paid un­der pro­vin­cial laws from the def­i­ni­tion of in­put tax is a fun­da­men­tal de­par­ture from VAT prin­ci­ples and will have an in­fla­tion­ary im­pact. All pro­pos­als should ad­here to the prin­ci­ples of VAT and this pro­posal must be with­drawn im­me­di­ately,” he added. The ABC ac­knowl­edged cer­tain steps had been taken to in­crease the cost of not pay­ing taxes in the last bud­get such as the im­po­si­tion of WHT on bank­ing trans­ac­tions ex­ceed­ing PKR 50,000 for non-fil­ers but high­lighted that agri­cul­ture and real es­tate, two main seg­ments of the economy, largely re­main out­side the tax am­bit.

“The im­ple­men­ta­tion of growth-cen­tric re­forms and fis­cal con­sol­i­da­tion need firm at­ten­tion through­out the year. With the IMF pro­gram sched­uled to end in Aug-2016, plans to im­ple­ment fis­cal re­forms need to be viewed with cau­tion,” said ABC Pres­i­dent. The ABC is one of the largest in­vestor groups in Pak­istan with 67 mem­bers most of them rep­re­sent For­tune 500 com­pa­nies. They op­er­ate in var­i­ous sec­tors i.e. health­care, fi­nan­cial ser­vices, in­for­ma­tion tech­nol­ogy, chem­i­cals & fer­til­iz­ers, en­ergy, FMCG, food & bev­er­age, oil and oth­ers. ABC mem­bers have cu­mu­la­tive gross rev­enues of US$ 4.0 bil­lion.

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