Tax to result in closure of beverage units

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KARACHI: Beverage industry has warned the government that imposition of capacity tax on beverage industry may result into closure of dozens of beverage and juice units, making thousands of people unemployed and causing billions of rupee revenue loss in addition to litigation at various forums.


An industry source said that the capacity tax was withdrawn in 1994. However, some influential beverage bottlers had approached the government to re-impose the capacity tax system for creating a monopoly of two beverage multinational giants in the country.


Capacity tax is a tax where opportunity or potential of a plant is taxed, not the sales. Unlike commodity trade, forward selling is not possible in beverage industry. The capacity tax even failed in commodity business such as sugar industry.


The sources said that the industry giants had imported air turbo fillers with high speed valves that increased the capacity manifold, resulting into three times more production and payment of one-third of tax.


Government has been proposed 25 percent increase in the tax revenue over the last year. The government does not realise that the revenue figures are already understated by 50 percent and this would only have an impact of 12.5 percent on bottlers who have been evading tax and would legitimise the evasion.


“This system is to tax and penalise the honest and legitimise a tax evader,” said Ikram Elahi, former vice chairman of Pakistan Beverage Association.


Ikram Elahi said that he was in beverage business since 1965 and lost Multan and Islamabad plants as result of 1991-1994 capacity tax and had recently given a closure notice to the Federal Board of Revenue for Lahore plant.


Our correspondent from Lahore adds: The Lahore Chamber of Commerce and Industry (LCCI) has appealed the government to take small and medium players in the beverage industry into confidence before the imposition of capacity tax, which favors multinational companies.

Courtesy:   The News

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