960422

ABC suggests

broadening

of tax base

IQBAL MIRZA

KARACHI: The American Business Council of Pakistan (ABC) which represents the interests of US financial institutions and multi-nationals in Pakistan, feels strongly on resource mobilisation and broadening the tax base in the country.

It has suggested to the Cabinet Committee on tax policy that resource mobilisation can best be achieved by adopting the following measures:

- Tax net should be expanded to include areas which are presently exempt from income tax e.g. agriculture and fixed income tax cases.

Rates of income tax, sales tax and excise duties should be lowered to reduce the incentive for tax evasion and thereby increase the overall revenue.

ABC has further suggested that the process of documentation of economy should be accelerated to add new assessees, and exemptions of sales tax in industrial free zones should be withdrawn as it creates uneven playing field and hurts revenue collection.

According to ABC net protection to local industry should not be less than 25 percent, after taking into account all local taxes, levies and workers profit participation fund (WPPF) workers welfare fund (WWF) etc, as it is necessary for the growth of industrial base.

Further, capital goods, telecommunication equipment, industrial raw materials and components should be subjected to very low duty, with no sales tax, so that rapid industrialisation takes place.

FASTENER INDUSTRY

Meanwhile, Pakistan Industrial Fastener Manufacturers' Association (PIFMA) has in a letter, suggested to the Secretary, Ministry of Commerce, Salman Farooqui, to ensure that the existing fixed sales tax scheme for fastener industry for domestic sales not only continues but remains for a period of five years as a matter of policy and fixed tax rates may be revised on annual basis and indexed to inflation.

Qazi Ebadullah Khan, Chairman, PIFMA, in response to the ministry of commerce letter seeking PIFMA's proposal for increase of export of fasteners has pointed out the operational problems during the current financial year faced by the industry and has suggested following measures to resolve them.

The fastener industry has been afflicted by several factors that have inhibited its growth into a well organised, high quality, value-added industry.

Fastener industry can be cultivated into a good export earning source for the country and can only happen with government's encouragement, facilitation and support.

The industry requires zero based duty and no Sales Tax on all manufacturing inputs. (raw material, toolings, spares, lubricants, wrapping and packing materials).

It should be allowed export rebate of 50 percent of FOB value of Fasteners exported.

Concessionary rate of export financing considering 90 days pre-shipment and 90 days post-shipment should be allowed; and

Raw material (wire rod) if locally purchased should qualify for export rebate.

The export incentives to fastener industry will also benefit the suppliers of material to this industry and will have a syngeristic effect on the economic activity as a whole.

Another benefit that can be seen due to increase in exports will be attainment of economics of scale and higher utilisation of installed capacities, lowering of manufacturing costs, improvement of quality, healthy competition, investment in modern plant and machinery, human resource development and acquisition of modern manufacturing technology.