KCCI urges govt to introduce reforms for economic growth

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Karachi: The Karachi Chamber of Commerce and Industry has emphasised that the newly elected government in its first 100 days must bring economic reforms which are crucial for sustained economic growth leading to economic prosperity and development in the country.

President KCCI Muhammad Haroon Agar, unveiling the Chamberís budget proposals for 2013-14, said that governmentís basic objectives of the budget exercise should be to increase the foreign direct investment (FDI), reduce the budget deficit and create new ventures for industries, said a KCCI release on Tuesday.

He urged the new government to facilitate private sector, encouraging entrepreneurs to expand existing businesses and to undertake new ventures and industrialisation.

The KCCIís proposals seek to redress the issues through both administrative and policy measures aimed at providing relief and facilitation to the tax payers.

Efforts should be made to identify the segments/sectors which have so far been left out of the tax net despite generating substantial income, leakages in the system, exemptions and evasions.

Haroon Agar stated that KCCI is fully aware of the present situation of the economy and as such feels the dual responsibility of looking after the interests of the business community and at the same time strengthening the governmentís efforts for revenue generation and broadening of the tax base.

KCCI recommendations for all major sectors stress on the need for reducing taxes on already burdened sectors and levying taxes on untapped areas. This should be done through consultation with trade bodies. ďEvery income must be taxed,Ē he remarked.

KCCI has highlighted the issues such as fiscal measures, high mark-up rate, energy crises, high gas and power tariff, inflation, industrial production cost, declining exports, increasing cost of raw materials, petroleum product prices etc.

It is also highlighted that high rates of customs duty, sales tax and withholding tax on import of raw materials, intermediate and finished goods must be brought down to curb smuggling and illegal imports under the cover of Afghan Transit Trade. After 18th amendment and 7th NFC Award, the right to collect taxes on services remains with the Provincial government. As done last year, the KCCI would also like to present its proposals to the Sindh Government, he said.

President KCCI stated that in the last few years the governmentís role has been missing in providing and maintaining the industrial infrastructure, gas and electricity, a growth oriented monetary policy and a conducive environment for promotion of trade and industry. KCCI in its budget proposals opined that the growth rate of Gross Domestic Product (GDP) should at least be 4.5% just to break even or achieve zero growth.

It is imperative to inject a new spirit of dynamism in the entrepreneurs to expand existing businesses as well as to undertake new ventures. †A number of measures are necessary to achieve this goal. With the present state of affairs in the institutions such as PIA, Railway and Pakistan Steel Mills, which are burdened with surplus staff numbering thousands, only the private sector has the capacity to create new jobs. Growth in Industry means growth in jobs and growth in jobs means growth in GDP.

Haroon Agar said that KCCIís budget recommendations this year are aimed at reversing the negative trends in various sectors of the economy.

Rates of GST and Income Tax be brought down to a maximum of 9% and 25% respectively to provide relief to trade and industry.

Customs duty and taxes on capital goods such as machinery and basic raw materials be brought to a nominal rate.

The flow of goods through Afghan Transit Trade has to be more regulated and controlled. Prices of fuel, electricity and gas should be rationalised and reduced wherever possible so as to reduce cost of production.

GST System of Revenue generation suffers from major flaws which results in hardships to the tax payers. Online computerized system of filing tax returns has flaws and inadequacies making it difficult for a registered person to file returns, rectify errors detected subsequently and avail the entitlement to tax input and refunds.

He called for amendment in Sales Tax Act-1990 and a comprehensive amendment in Income Tax Ordinance 2005 to repeal the draconian laws governing the tax policy and curtail the unbridled discretionary powers to the officers of Inland Revenue.

To achieve revenue targets and offset the deficit, loopholes and avenues for evasion must be closed.

Exemptions to be withdrawn and other incentive regimes be replaced with Export Voucher Scheme. Law and Order should be restored in the largest city of Pakistan which contributes 68% of tax revenue.

There has to be a national consensus on measures to be taken to extricate this once thriving city from the shackles of violence, crime, arms and various mafias.

President KCCI stated that chronic fiscal deficit is due to revenue shortfalls and uncontrolled expenditure. Total focus on rural economy by previous government has severely impaired the capacity of urban economy to pay taxes and generate growth.

Public sector development programme (PSDP) lacked transparency and massive losses by state owned enterprises. Shortage of electricity and gas was faced by industries all over the country.

There was lack of transparency in budget expenditures such as PSDP and discretionary funds. A disintegrated tax structure and flaws in e-filing systems.

FBRís inadequate capacity to administer and manage revenue collection. A number of income generating sectors are exempt from all taxes. Irrational and draconian tax laws and sweeping discretionary powers to officers of inland revenue are negative factors.

Each of these issues is discussed in detail in the specific proposals of KCCI being unveiled today, the KCCI statement said.

Courtesy: The Nation

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