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Budget: Proposals fall short of industry’s expectations

Budget: Proposals fall short of industry’s expectations

KARACHI: The trade and industry received budgetary proposals presented by Finance Minister Ishaq Dar for 2015-16 with reservations as measures fell short of their expectations.

There was consensus amongst business leaders that the budget proposals failed to give incentives to export-oriented industry, particularly the textile sector.

They appreciated the incentives given to agriculture, construction and power sector investors and believed these measures could help the economy perform better.

Some termed it a ‘traders budget’ tailored by an accountant because it lacked measures to promote industry.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Mohammad Adrees told Dawn that many proposals they forwarded had been accepted, but the government did not propose incentives that can guarantee tangible results.

He further stated that it was the FPCCI that proposed to change the qualifying threshold for concessions to private power plants from $50 million investment to a threshold of 25MW.

Secretary-General of Overseas Investors Chamber of Commerce and Industry M.A. Aleem said that targets set in the budget proposals are ambitious, but are achievable.

The GDP growth rate proposed at 5.5pc from current fiscal of 4.2pc, he said could only be achieved if targets fixed for agriculture sector at 3.9pc and industry at 6.4pc are met.

Similarly, Mr Aleem said the fiscal deficit of 4.3pc could only be achieved if tax collection target at Rs3.1tr with a growth of 19pc is achieved.

Only incremental taxes have been proposed without broadening the tax net, he added.

The Public Sector Development Programme (PSDP) at Rs700 billion with a growth of 30pc is ambitious, but again it will depend how far the government succeeds in achieving tax collection target.

Korangi Association of Trade and Industry (KATI) Chairman Rashid Ahmed Siddiqui termed it a ‘traders’ budget and felt that no worth mentioning incentives have been given to industry.

The demand of trade and industry for reduction of sales tax rate has been ignored.

Mohammad Jawed Bilwani, chairman, SITE Association, was highly critical of the proposals and said that instead of declaring all the five export-oriented sectors as zero-rated, they are burdened by enhancing sales tax rate by 50pc from 2pc to 3pc and 5pc for non-registered exporters.

The incentives given to export sector, Mr Bilwani said were never fulfilled in the past and by enhancing the rate of drawback on local taxes and levies from 4pc to 5pc is not more than an ‘eye-wash.’

Similarly, he said by reducing the rate of export refinance from 5pc to 4pc, the government has only added to the list of incentives because banks are reluctant to lend to the private sector.

Fawad Ijaz Khan, patron-in-chief of Pakistan Leather Garments Manufacturers Association, however, felt that the finance minister had given special favour to textile sector by announcing ‘Textile Package.’

He further stated that the proposed measures are cosmetic and even in the past such promises were made but were never met.

Citing an example, he said, that even in the last budget (2014-15), the minister on the floor of the National Assembly assured to clear all the outstanding sales tax refunds by Sept 30, 2014 and similar commitment has again been made by him with new date of Aug 30 last.

Mirza Ikhtiar Baig, member of FPCCI’s managing committee, said that the budget proposals focus on documentation of economy through harsh measures and only given incentives to agriculture and construction sectors.

He was critical of Gas Infrastructure Development Cess and non-payment of sales tax refund.

Former chairman of Rice Exporters Association of Pakistan and senior vice president of FPCCI appreciated the incentives given to rice sector in the budget proposals.

Published in Dawn, June 6th, 2015

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